30 May 2024

Downsizing demand is there and specialist finance can facilitate it

By MFS

Downsizing has come to the forefront in the property scene. In our never-ending search for more supply, many commentators and stakeholders are focusing on how older homeowners could provide the space needed for new families to grow. But, as is often the case, downsizing can be easier said than done – especially for those in their retirement years.

While it’s a complicated picture, our older generations own most of the property space available in the UK. Often, they have more space than they technically need. Owner-occupiers aged 65 or over hold nearly £2.6 trillion of the UK’s net housing wealth according to Savills[1], out of a total of £2.74 trillion. Collectively, the over 50s now own 78% of all the UK’s privately held housing wealth.

The challenge with this, is that younger generations also want own their “fair share” of housing wealth. As the housing discussion evolves, envy, and even resentment emerges from younger generations.

Zoopla[2], in late 2023, found that 4 in 10 over-65s live in homes that are larger than they need. This equates to around 2.6m homes that could be used by younger families, or those who want to start one. 

But, it’s not as if there isn’t demand for downsizing among the elderly. While some may not want to give up their larger homes, others will be keen to do so. Often, older people may be keen to downsize to live in homes that are easier to get around in, save on utility bills, and/or be closer to family members. Also, while it will depend on individual circumstances, downsizing can add several hundred thousand to a retirement pot[3]

Unfortunately, older homeowners are often disincentivised to act. Our housing shortage also means there’s a lack of suitable, smaller homes for retirees to move to. The 2022 census[4] revealed that just one in five dwellings had just one or two bedrooms. Also, large stamp duty bills and other costs can prevent people from downsizing[5]. Furthermore, they are also arguably competing with the first-time buyer and small family buyers too.

Still, over the coming years, we will likely be forced to find solutions for our downsizing conundrums. Our population is aging, and we will need more suitable options to accommodate an older population.  Between 2011 and 2021 alone, the share of the population aged 65 or older in Britain rose from 16.4% to 18.6%[6]. Currently, there are around 11 million people in the 65+ age backet, which is expected to hit 13 million by 2031.

Fortunately, while there are challenges to overcome in the downsizing space, there are also solutions. Specialist finance is there to help borrowers secure smaller, yet desirable assets quickly, and flexibly. At MFS, our bridging loans can be used by borrowers aged up to 85, while also being able to cover various associated costs, and avoid arduous property chain delays.

Our loans can also accommodate complicated scenarios or setups. For example, given a general lack of availability, when a downsizer does find a suitable option, they’ll likely need to move quickly before the opportunity is gone. This may be especially true in some of the UK’s downsizing hotspots such as Bedfordshire[7], Hertfordshire, Berkshire, and the North East of England[8].

Moreover, downsizers can end up moving from a large freehold home, to a smaller leasehold property[9]. This can bring with it certain administrative costs, and add another layer of complication. But, our loans can be used for both freehold and leasehold investments, along with a broad range of property types.

Downsizing can bring with it many benefits, for both the downsizer and the wider population. The associated difficulties shouldn’t prevent us from making progress here, and MFS will be there to do what it can to facilitate positive outcomes for all.

 

[1] https://www.savills.co.uk/insight-and-opinion/savills-news/346692-0/housing-wealth-held-by-over-65s-hits-record-high-of-over-%C2%A32.6-trillion--according-to-research-by-savills

[2] https://www.thisismoney.co.uk/money/mortgageshome/article-12748685/Four-10-65s-live-home-larger-need-says-Zoopla.html

[3] https://www.ft.com/content/2a2826bb-2ff2-4730-a2c8-3f70c27a01e8

[4] https://www.thetimes.co.uk/travel/destinations/europe-travel/ireland/downsizing-might-be-the-answer-to-all-your-property-problems-qhxrsw9ld

[5] https://www.telegraph.co.uk/money/property/stamp-duty/baby-boomers-not-lucky-generation-150000-stamp-duty/

[6] https://www.telegraph.co.uk/money/property/baby-boomers-not-downsizing-holding-on-large-homes/

[7] https://www.gbnews.com/lifestyle/property/uk-region-downsize-property-park-home-bedfordshire

[8] https://uk.finance.yahoo.com/news/lucrative-regions-downsize-property-050016572.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAMVp_P1a4813-Iy_ryZ2VwzOa7BYfe4yjPMF0iIXITbSvEOOlzR_ASo-oXGeC421xbpbqbBeveC1cJZv6LW43zQuV3fBitu-JYFpT1Ajd3vtdLFwWJQba3QVI9CHRLquOfFC0sNxg2iCiUYMnAOB5KK01beL4gOsWc23SToNmxlm

[9] https://www.knightfrank.com/theview/downsizing-benefits-pros-cons/

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