You say that: but, think about it a little more…
WHO is going to buy the properties to release the inheritance? You’re assuming there is some third category of people who are going to pony up the cash at current values so that it can be released. Who are those people?
So far, when the older generation has been liquidating property to give inheritances to their children, much of it has been bought by landlords (often themselves of the older generation — 1 in 6 boomers are landlords). ONS statistics show that most of the property market has been sustained in the last few years by over-55s essentially trading properties amongst themselves. A lot of the bottom rungs of the market — the properties that first or second time buyers have traditionally bought — is now private rental stock.
When more and more need to sell, who buys the properties at the inflated values so that the inheritances can be released? You need a market to sell to: landlords, investors, immigrants, young people. For this you need economic confidence: low interest rates, a booming economy, expectation that property values will rise, good jobs on offer with good wages and a decent level of disposable income.
What happens to property in a time of recession or economic under confidence? And once more and more over-60s — who, remember, outnumber the younger generations — start dying or going into care homes, and put more and more properties on the market — what happens to them in an economic downturn? Well, Barbara who wants to downsize but can’t find a buyer doesn’t want to drop the price, so she puts it off a bit longer. After all, she wants to preserve the kids’ inheritance. But Ethel next door needs to go into a care home, so Ethel’s son has to drop his price to sell the house to afford it because there aren’t any of the cheaper state care home places available in their area.
Suddenly, prices on that street are now lower. But there still aren’t many buyers around, and eventually Barbara’s kids want her to sell up to buy herself that new hip privately. She’s got three children, though, so once she’s downsized, splitting the profit between three of them isn’t as much as they thought. Interest rates are higher, the cost of childcare has rocketed, and taxes have gone up, so even with the extra inheritance Barbara’s kids can’t afford to trade up to a new house; and they can’t find a buyer for theirs either, because there are no first time buyers at the bottom of the market. More and more older people need to sell to help fund their care, and they are competing for the precious few buyers who can afford to buy in a downturn when interest rates are high, credit is tight and workers are worried about their jobs.
In the meantime, Nigel Farage has become PM; immigration has collapsed, and he’s put half the universities out of business, to the cheers of his target voters and the Daily Mail, who have been chanting “no more Mickey Mouse degrees!” Only, now all the market for student rental flats and HMOs for immigrant workers has collapsed too, so rents are plummeting. More older people start to panic and put their houses on the market, but that just makes the situation worse, because more recent buyers in the market start to be hamstrung by negative equity, whereas boomers own outright, so they can drop their prices lower and are more desperate to sell (or their kids need to sell, so they’ll accept a lower inheritance in order to have their parents’ houses off their hands). Old people do keep dying, after all, and leaving their houses behind, even if there aren’t enough buyers who can afford them. And there you have a classic market crash. The engines that powered property speculation on the way up go into reverse. Why buy when the market’s falling?
If you think my narrative above is too fictional, consider this: since there are fewer people in the lower generations than the older population, who IS going to buy the houses to release the inheritances? That’s the same people who want the inheritances. But there aren’t as many of them as there are houses to sell. (If you think it’s just going to trickle down a property “ladder”, unfortunately the ladder broke some time ago, and landlords replaced lots of the buyers on the middle and lower rungs. Only, the landlords are the same older people who’ll also be selling up their other houses, too…)
Immigration was actually what governments hoped would plug this gap. Ironically, the voters who this would actually benefit actually vote against it, rushing to economic disaster like turkeys to a Christmas market.
Ditto re Brexit. If the idiots vote in Reform, that’s like getting Trump 2.0. Fool me once, shame on you; fool me twice, shame on me!