On in three home moves, about 200,000 a year are now made by owners aged 55 and over as a growing number use their huge equity reserves to find their perfect last home, according to new research.
The numbers have almost doubled in the last decade and many buyers in this sector are cash buyers with less than a fifth taking out a mortgage, the study from the Intermediary Mortgage Lenders Association (IMLA) shows.
The report assesses the relatively undocumented growing trend of older home owners predominantly using cash to move from their established family home.
It found that each year only around 2.5% of the eight million older home owners in England move. But it predicts that, as the cohort of over-55s swell faster than all other generations over the coming decades, more people will seek to make one final housing transaction.
According to estimates, property turnover has halved over the past 25 years and transactions continue to run at only about three quarters the pace before the credit crisis. The picture would have been a lot bleaker had it not been for much higher activity from late time buyers, it suggests.
The study also found that some 63% of older home owners own their property outright, and they account for the bulk, 84%, of all outright owners, holding a disproportionate share of housing equity at £1.8 trillion out of a total £2.6 trillion.
Much of this equity is likely fuelling last time buyers. In 2016/2017 in England they accounted for nearly all of the moves by outright owners, some 132,000 out of 138,000, up by 20% overall since 2006/2007.
The reports says that this strongly suggests that most last time buyer activity, and much of the growth in that activity, has to date been cash-financed, a phenomenon which has remained relatively hidden as many commentators focus only on mortgage transactions to assess the housing market.
A wide array of factors serve to hold back last time buyer activity, but prominent among them are poor choice of suitable properties to buy, high transaction costs and affordability pressures.
The report found that relatively few older home owners actually need to move for health or other personal reasons, and for the vast majority any move is aspirational in nature and focused on the mainstream housing market.
And, although there is some preference on the part of older people to move to a smaller and/or a cheaper home, there is a wide spectrum and not insubstantial numbers of older homeowners looking to move in the opposite direction.
‘Our increased life expectancy and growing number of people aged 55 plus means that, far from being a niche sector, the number of last time buyers in England has doubled within a decade,’ said Kate Davies, executive director of the IMLA.
‘It’s clear that there is much appetite among older home owners to move into a property better geared to their needs in later life, whether that be in terms of preferred location, character or size, but they face a number of headwinds in achieving that,’ she added.
‘It is curious that house builders appear to have been slow to recognize what could be a sizeable market for a variety of designs that combine practicality, low maintenance and energy efficiency. Retirement developments aimed at senior citizens have their place, but they’re not appropriate for everyone,’ she pointed out.
‘From a lending perspective, we have already seen considerable financial innovation around mortgages into retirement, lifetime mortgages and retirement interest only products. But there is much more that could be done in fostering LTB schemes, whether these are bespoke equity loan deals, shared ownership schemes or entirely new arrangements,’ she explained.
Davies also pointed out that it is time for the Government to address what last time buyers need and begin to work more closely with the lending and house building sectors to kick start activity, much as it did for first time buyers with its Help to Buy initiatives.
‘With demographic led demand set to increase, it is hard to avoid the conclusion that we need to unblock new supply and develop new models of housing that cater for mainstream last time buyers. We see huge opportunities for the housing and mortgage sectors to better serve the interests of older home owners over the coming years, and in ways that promote their lifestyle and well-being, as well as the wider health of the housing market,’ she concluded.
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