Demographic timebomb and housing

[Salisburyspire]

When do we think babyboomers will begin to sell? This is not a generational bashing thread by the way, am asking from a strategic point of view.

Any economists or demographers out there? I have only seen one UK article on this and it predicted they wouldn’t sell until 2034 onwards. Surely that’s too late? Is there a particular five year period during which we expect there to be a huge downsizing?

When they do sell up, will it leave a glut of large homes on the market? I’m Gen X but very much want to trade up (one last large house). We own our house outright but the next step up in the area near DC schools has exponentially shot up over the last three years. (Leafy London but not too far out). One issue is a massive shortage of decent housing stock in that area. Our plan was always to move there, see the DC through school and then downsize as there doesn’t seem any point to living in a big house without the kids there when we could by then be enjoying a more comfortable retirement and liberating some property cash while not worrying as much about inheritance tax or costs of maintaining a large house and garden.

It seems though that the generation before is not budging. There are widowed people living in enormous five bedrooms homes with huge gardens. They don’t all look to be super wealthy judging by some of the slightly overgrown gardens etc. Yes it’s a wealthy area and yes it’s their right to live wherever they want. However unless all these homes are in a family trust or already signed over, the inheritance tax bill will be enormous.
These are homes in the £2million plus bracket.

If we are lucky enough to buy one of these homes (and stretch ourselves massively) do the demographics work against us if we have to sell in 10-15 years? Won’t that coincide with a glut of large houses so we will have bought at the top of the market and possibly be selling in a downturn?

Will Generation X actually be the riskiest generation to lend to as they don’t have enough working years ahead of them to properly pay down massive mortgages whilst some (not all!!) millennials will inherit property wealth from babyboomer parents?

Should the government reform stamp duty to provide an incentive to downsize? (Yes I know there are not enough quality smaller homes for people used to huge ones in nice areas). Will there ever be a great downsizing shift or is our country not built for it?

@Salisburyspire "They don’t all look to be super wealthy judging by some of the slightly overgrown gardens etc"

An American couple I knew from work once told me the reason they were really disappointed with the property market in the UK is they would have to spend £2M+ on a house in London "only to live next to people they wouldn't want as neighbours" and that it would never happen in the Palo Alto!

Your comment reminded me of that! I know you didn't intend it (I hope) but I can understand why you asked the question.

The issue is pretty simple, in most countries, you pay a portion of the value of your house as tax (usually between 1-2%), annually, and the transaction costs of selling and buying houses are a lot lower. This makes the market function much "fluidly" as there are always people downsizing once they no longer need a much larger house. This also limits property hoarding by large commercial landlords, people who want to rent a house for a few days in the year for AirBnB etc.

@Elsiebear90 if tall people created or were part of a system where they benefited hugely at the expense of future short people, and then claimed you (as a short person having to jump through more and more hoops to try and get what came relatively easy to most tall people) shouldn’t complain about it because you’re just not trying hard enough, then you would have every right to feel bitter towards them.

I don’t personally feel bitter towards boomers just because they just took what opportunities were there, I can’t blame them, I would do the same, but it does annoy me when they claim life was just as hard for them in regards to buying property (the facts show it definitely was not) and because they didn’t have modern technology or weren’t eating avocado on toast etc, it is usually twinned with advice about how young people could buy property like they did if they just tried harder or saved more. It’s this failure to acknowledge as a generation how lucky they were in regards to property/jobs/finances that makes people bitter, also people will naturally be bitter when the thing they strive for the most is out of reach and they feel the people who have it don’t appreciate it or deserve it because they got it easily.

@Totalwasteofpaper, the elderly people you berate for leaving their houses to rot probably can't find trustworthy tradespeople or don't have the money for major maintenance now they are too old to get up the ladder and do the work themselves.

I know it's an unpopular opinion but I do think there should be incentives for people to move out of homes that are too big for their needs. Stamp duty or legal fees paid perhaps. I know everyone is entitled to live where they want to, but it seems a shame that the countryside is increasingly being concreted over to build more homes when perhaps we as communities could distribute the houses that already exist a bit better.

My MIL is a very good example. She still lives in the 4 bed home she bought her children up in, but has no ties to the area anymore as they've moved away. We are trying to convince her to downsize somewhere closer to us so we can help out more as she gets older but she feels strongly that she would be 'doing her kids' out of their inheritance if she frees up some of the cash locked in her house to live a nicer life or spend on the costs of moving. So she stays, spending most of her time in the one room alone while families get into bidding wars over similar houses in the area.

‘ I've seen articles stating that most "boomers" will be dead/in care by 2035’

That’s useful.
I’ve now got an expiry date.

I have no plans to be dead or in residential care in the next 20, let alone 13 years. Nor have my boomer mates who are fit & healthy.

What I have noticed in new house developments that there is scope for a downstairs room to be adapted to a bedroom en-suite if restricted mobility or illness occurs to save expensive modifications.

@xingming it’s not a benefit to live in a house that’s worth a million pound when you paid 1/10 of that? Of course it is, you can pay your mortgage off much sooner and have a better standard of living that anyone trying to buy the same house now as first time buyer, you can also release equity.

I'm in my 50s and trying to downsize from a 3 bed to a 2 bed but there aren't any.

but when we downsize we shall pay forward to our child, who will also inherit...

Personally I think this will become an issue because if you look at wage stagnation we are going to end up with young people who can only buy a home if their parents did & if they can be helped.

With the ageing population & increased tax burden some young people will look for opportunities & even if they don't we will need immigrants. But why come to work & lose it all in taxes & housing costs. The government will have to tap into housing wealth, what's the other option?

It's not a benefit because you can't spend a house!

That's not true, you can borrow against it or release equity.

I am a baby boomer but wont be downsizing. The cost of property is so high my adult DC can't afford to buy so we have extended and the big family house with converted outbuildings on a sizeable plot has been divided between us.

Multi-generational living is the way forward.

People may live in houses that are too big or too small for their immediate domestic functional needs, & yes there is a utility cost to this.

A significant factor in why staying out is that not only is the too big/too small house their home, it is that they are living in the community they know & where they belong e.g. friends, family, shops, activities, medical care. Once people stop working &/or commuting, these community connections are vital to quality of life.

You all know how people stay put in houses that are too small because of friends, family, shops & local schools.

Sometimes housing stock suitability just does not trump the human need for community.

I reckon Covid lockdown has shuffled many house owners priorities & the pipeline of family houses will be distorted. I doubt residential care homes will be so easily favoured for some time, unless there is a significant uplift in the care worker market & resident safety. I anticipate boomers staying put & undertaking renovations to improve eco efficiencies & reconfigurations of floor space.

Extending 2 bed houses to make 3, or 4, beds, reduces the supply of 2 bed houses. That affects both ends of the market. It may be the best option on an individual basis, but it's disadvantageous at a community level.

Multi-generational living is the way forward.

what happens re care costs in these scenarios?

I think the vast majority of baby boomers are still in good health and don’t consider themselves old. That’s been my experience with my parents and parents in law. Until you find a house unmanageable, you are not going to sell it especially if you’ve got lots of memories and enjoy having the family to stay.

Agree @Plantstrees about multigenerational living.

Fellow boomers are earmarking empty bedrooms to be reconfigured into bedroom suites etc for returning adults & their kids. Grandparents & grandchildren in the same house can be a blessing.

Also growing in popularity is a live-in adult renter blending a low rent with basic housekeeping, works well with mature students.

@EmmaH2022

Yes to all Brownlongearedbat points

I'd be interested to know what these posters think of as necessary work on a house as well.

Obviously my family doesn't have a house the size described here

But if it's possible, when the time comes, I'd like to live in it.

I'm just one person.

If I'm thinking that, there will be a lot of families inheriting large houses who want to do the same.

I’d consider necessary work things like rewiring (needs doing every 20-30ish years), servicing/removing ancient gas/electric fires, dealing with damp problems, dealing with unpruned trees which are now causing issues for the buildings, removing asbestos ceiling tiles, repairing/maintaining roofs, gutters etc. Then you have stuff which isn’t technically necessary but most people would want to do like putting in a modern kitchen and bathroom, replacing ancient boilers, putting in double glazing etc. There are loads of properties that come on in this sort of state and they’re not even all massive 5 bed places, just places that the owner was no longer able to maintain. For example www.rightmove.co.uk/properties/118138025#/?channel=RES_BUY

You are quite right @beddygu.

@Elsiebear90, ours has increased a lot but still not worth a million, and most of that has happened in the last three years, fuelled by WFH and lockdown.

@ledbydonkeys, I agree that it's sensible to replace domestic rates by a modest annual % of value... as long as stamp duty went. And there would be some lag in assessment of the databases, which is why we haven't had a wholesale revaluation of rates since the Poll Tax failed.

I've seen articles stating that most "boomers" will be dead/in care by 2035

I’ll be 70 then. I hope I’m very much alive!

The issue is pretty simple, in most countries, you pay a portion of the value of your house as tax (usually between 1-2%), annually, and the transaction costs of selling and buying houses are a lot lower.

this is a good idea

@beddygu.

That’s a good question.

With support at home, people are less likely to need residential care.

Selling a multigenerational house to pay for what would be essential care would be the same if there a co-owner of the house. I assume that people will sort out the legalities of the multigenerational home ownership.

[quote XingMing]@Elsiebear90

@EmmaH2022 of course you benefit from buying a house for peanuts that’s now worth millions, because there’s no way you could ever afford to live in the same house if you tried to purchase it at its current value. If you’re like my parents you’ve paid off your tiny mortgage very early and your house has increased in value ten fold in the past twenty years, how is that not a benefit to them?

It's not a benefit because you can't spend a house! Until you realise the equity by selling, it's not liquid cash so it makes zero difference what it's "worth".

Our house was our third property, and cost about £130k at the depths of the early 90s recession. And, no we couldn't afford it now, with 25 years of property inflation and relatively slow income growth, but when we downsize we shall pay forward to our child, who will also inherit... and we haven't inherited a dime. DMIL is spending her equity on nursing home costs fast (at £4k per month) and DM's home is very modest indeed.[/quote]
You can spend the house by doing equity release.

I’ll be 70 then. I hope I’m very much alive!

I hope so too. I will say a lot can change in a few yrs. My colleagues husband was incredibly fit, never ill & had a devastating stroke at 75. My fil was also very healthy but developed early onset dementia & in a yr was a different man. Yet his father lived to 99 with no ailments.

Healthy life expectancy is only 63/64

@UniversalAunt

"With support at home, people are less likely to need residential care.

Selling a multigenerational house to pay for what would be essential care would be the same if there a co-owner of the house. I assume that people will sort out the legalities of the multigenerational home ownership."

So the answer to rising house prices is to ask your adult children to move in with you so they can take care of you in exchange for not paying rent? My, haven't we progressed as a society! What's the next great idea? The women stop working and take care of the house, her in-laws and the children because that's her place?

Also I have definitely read threads on here from posters devastated that their parents are selling 'the family home'.

Thinking about my street in the 15 years we've lived here, as far as I know not a single elderly person has sold up to downsize. They've all lived in their homes until they died and then their families sold their houses. I suspect very few couples downsize, especially if their children live close by.

@UniversalAunt I think it's a good idea & will become more of a trend but I did wonder re care as younger generations will likely be working longer as pensions age is older & private schemes generally not great but maybe as you say having family around with reduce the need