Kate Davies: More needs to be done to help last-time buyers

Michael Lloyd

April 9, 2019

Kate Davies, executive director of IMLA, has called for the mortgage and housebuilding sectors and the government to introduce changes to make it easier for last-time buyers to move.

This follows an IMLA report which found nearly 200,000 owner occupier housing transactions in England are now made by the over-55s as a growing number use their huge equity reserves to find their perfect last home.

Davies (pictured) said: “There is much more that could be done in fostering last-time buyer schemes, whether these are bespoke equity loan deals, shared ownership schemes or entirely new arrangements.

“It may also be time for the government to address this last-time buyer policy blind spot 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 homeowners over the coming years, and in ways that promote their lifestyle and well-being, as well as the wider health of the housing market.”

The report – ‘Last-Time Buyers: the challenges and opportunities for 55+ homeowners wanting to move’ – found the number of older homeowners predominantly using cash to move from their established family home has roughly doubled over the past decade.

The report noted that each year only around 2.5% of the eight million older homeowners in England move. But it predicted 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.

Davies added: “Our increased life expectancy and growing number of people aged 55+ means that, far from being a niche sector, the number of last-time buyers in England has doubled within a decade.

“It’s clear that there is much appetite among older homeowners 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.

“It is curious that housebuilders appear to have been slow to recognise 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.

“From a lending perspective, we have already seen considerable financial innovation around mortgages into retirement, lifetime mortgages and retirement interest-only products.”

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 last-time buyers.

A majority of older homeowners – 63% – own their property outright, and they account for the bulk (84%) of all outright owners, holding a disproportionate share of housing equity – £1.8 trillion out of a total £2.6 trillion.

Much of this equity is likely fuelling last-time buyers. In 2016/2017 last-time buyers in England accounted for nearly all of the moves (132,000) by outright owners (138,000), which were up 20% overall since 2006/2007 (115,000).

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.

While last-time buyers currently account for a small percentage of the 55+ home-owning population, 47% of the homeowners over 55s, representing about four million households, plan to downsize at some stage.

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.

IMLA’s report found that relatively few older homeowners 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.

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