The argument is that older people are sitting in their cavernous abodes, not using the majority of the rooms, when they would perhaps be far better off in one or two-bedroom retirement-esque properties, thus ‘giving up’ their homes for those who would utilise them more effectively. This train of thought appears to have gained traction in some parts of government. Prior to the recent Budget, some were even anticipating there could be Stamp Duty help offered to older homeowners in order to encourage them to move sooner rather than later.
It all seems so simple, doesn’t it? However, my own view is that delivering an environment where downsizing is encouraged and easy to achieve fundamentally ignores human nature. First, you have to start with the individual – do they really want to move? Perhaps – many homeowners do struggle more with larger properties as they get older.
If that’s the case, then where do they move to? Because, one thing’s for certain, the UK housing market is not exactly flooded with suitable options for them, particularly when you add in location, wanting to be close to family, suitable accommodation, potential support and help in the home, the list goes on.
In a recent survey carried out by Now: Pensions, 40% of homeowners said their housing wealth would form a ‘crucial’ part of their retirement income, however the majority of those (63%) felt this would come in the form of downsizing rather than, for example, using equity release or perhaps taking in a tenant. Interestingly, when quizzing today’s older homeowners – the baby boomers – 61% said they wanted to downsize to boost their income in retirement.
‘a foray into cloud cuckoo land’
Without wishing to pop the aspiration bubble here, I think as advisers we may need to offer a more realistic vision of what is achievable in today’s marketplace; indeed, when it comes to downsizing as an effective problem solver, either now or later in life for younger homeowners, for some this could be a foray into cloud cuckoo land.
My belief is that many homeowners simply believe a downsizing option will be available to them and that’s that. However, when they get to that point, see what property they can afford, see what the living arrangements are like, see where they can and can’t live, understand the stresses and strains of selling, buying and moving, confront the emotional attachment they have to their home, they might tend to think otherwise. Of course it’s achievable but it should not simply be assumed that it’s a God-given right and that the client will be able to achieve everything they wish to by doing it.
‘we need to wean clients off the downsizing myth’
It is good that more people recognise the value of the asset they have and accept they may have to use it to fund their retirement, but it is somewhat naive to think that value can only be accessed through downsizing. That’s not the market we have now, and it’s not the one that will exist in the future, plus it doesn’t necessarily fit for the older homeowner anyway, especially when they do genuinely consider the alternative properties available to them.
Far better I think to begin outlining the other options that are available now, such as equity release, which can take them to their retirement goals but may not necessarily involve moving home. To my mind, we need to wean clients off the downsizing myth and instead help them consider the other solutions that are much more achievable in a market which may be unrecognisable to the one they previously dipped into.
Stuart Wilson is managing partner of the Later Life Academy