Part of that pre-Budget inevitability is a continued focus on stamp duty, with many in our sector continuing to call for – sometimes radical – change in this area.
Over the last few weeks, I have read articles suggesting further ‘holidays’ for first-time buyers, increases to the thresholds in order to take more people out of the tax when purchasing, plus calls to scrap stamp duty altogether.
A further suggestion – and one that has been notable in recent years – comes in the form of whether stamp duty for those wishing to downsize property is still viable. Also, it has been asked whether the government should instead exempt downsizers to allow them to move to smaller properties, and free up the larger homes that are hard to come by for those seeking to move up the ladder, particularly families.
Suitable houses for downsizers
A recent report, commissioned by the Family Building Society and sponsored by Lords Mandelson and Heseltine, urged policymakers to look at this option. It suggested there were considerable numbers of older homeowners who wanted to downsize but were put off by the large costs involved, particularly stamp duty on the purchase.
I’ve no doubt there are some individuals in this situation, who would ideally like to move out of larger properties and are perhaps being put off by the sums of money involved, not just of course in stamp duty – which could well be seen as ‘wasted money’ – but also in terms of moving and estate agency costs and everything else that comes with downsizing.
Historically, of course, downsizing was essentially the only option available to those who felt their property had outgrown them and their needs, or were looking to extract some of the capital value they had accrued in a home.
Nowadays, as advisers will know, there are other options available, including different types of later life lending such as lifetime mortgages, which allow people to stay in their homes if they do not want to move or can’t get that downsize to work.
That last point is crucial, because there’s a wider issue at play here for older homeowners, and it comes with the nature of today’s UK housing market. Back in the day, for example, there might have been a much greater supply of suitable homes for downsizers to move into, and the cost of those homes would have allowed them to extract capital value as well as afford the purchase.
A lack of choice
Now, for many people, there are fewer options. Take, for instance, the historical mainstay of the older homeowner – the bungalow. Research at the end of last year from Quickmove Properties revealed that just 1.2 per cent of all new-build completions are now bungalows, and this kind of home accounts for only 7.6 per cent of the UK’s entire housing stock.
In other words, the number of bungalows has been shrinking, because, quite frankly, why would a new-build developer with a finite amount of land build a property that takes more of that footprint when they can use less land to build two- or three-storey homes?
It’s a question of economics. Therefore, not just bungalows, but the wider supply of properties available to those wishing to downsize has shrunk, and of course the price of property has continued to rise, making it more difficult to move, certainly to properties that fulfil the needs of the ‘average’ downsizer.
While I believe a stamp duty cut, holiday or simply getting rid of it for downsizers might well provide the impetus for some to be able to move, I certainly don’t believe it will be a game-changer in terms of freeing up the property required for those wishing to secure bigger family homes.
In fact, without greater levels of property supply right across the board, the likelihood is that more and more people are going to be staying in their home for longer. As a result, they’ll look at the ways by which they can do this, releasing the money they require, and reshaping those properties to fit their needs in later life.
In my view, until there is a concerted focus on new-build provision and increasing this dramatically to fit the demand needs of all types of homeowners, we are likely to see continued – and greater use of – later life lending, and advisers certainly need to be prepared to meet this demand both now and in the future.
