4 June 2015
Are we talking ‘last-time buyers’ or ‘one-foot-in-the-grave buyers’?
by Serena Sinclair
A brief look at Nigel Wilson’s proposals for the housing market
According to Nigel Wilson’s entry in Wikipedia, he was born in 1956. That makes him……hmmm.. 59? However, in spite of his age, which could put him into the category of Last-time Buyers’ (LTBs) I suspect he is not amongst the one in three of the ‘over 55s’ looking, but somehow unable, to downsize. On a salary of over a million pounds as CEO of Legal and General and with five daughters (who may or may not still be living at home) he is unlikely to be looking to exchange his current accommodation for a neat two-bedroomed apartment with a communal garden in which to spend his ‘autumn years’. Who then are these people desperate to move to retirement homes? Do they really exist or are they dreamt up by Legal and General’s marketing department in a desperate bid to apply ‘creative thought’ to the housing market?
A study, published on 1st June by Legal and General and the Centre for Economic and Business Research, suggests that the key to our housing crisis may lie more with the LTBs than with the First- Time Buyers (FTBs) at the other end of the market. According to this report a shortage of suitable housing for those wishing to ’right-size’ is locking up more than £800 billion in ‘potentially recyclable housing stock’. This is an interesting and radical idea and many of the suggestions put forward by Nigel Wilson (Daily Telegraph Business Comment Monday 1st June) clearly make a lot of sense. At the same time, I do not think that anyone should imagine that simply because more homes are built with retirement in mind that 33%, rather than the current 7%, will actually decide that downsizing is the right thing once they hit 60 or even 70, or that when they downsize they necessarily wish to move to a brand-new retirement home.
As Nigel Wilson himself points out, much retirement housing is currently sold on a leasehold tenure. This is not always seen as desirable. Maintenance and service charges are often high and the resale value of much of this housing can be less than the original purchase price. More diversity of tenure across the retirement market would undoubtedly increase its appeal. For those who have already paid off their mortgages at retirement (possibly at present a not uncommon scenario, but perhaps increasingly less likely to be the case amongst future generations) more freehold and upmarket options for the early retirement years could be attractive. In America and Australia this market is already being tapped with sports, leisure and other community facilities being offered onsite by companies like ‘Stocklands’ or ‘Retire Australia’ both of which run retirement villages all over Australia. These villages offer a mixture of ‘Independent Living Units’ (one, two and three bedroom units) and Serviced Apartments for those older residents unable or less able to cope. However, not only are there various types of property available, but different types of tenure are available too. Under our legal system more rental options and shared equity options could be made available. This could help those with less or no equity in their current home.
Browsing the internet for the options available for retirement living in the UK, it is very evident that the majority of property is not only unavailable as freehold, but is only available on 125-year leases. This may sound a long time when the properties are new, but it will of course have a fairly rapidly diminishing value as time goes by. Add to that fact that most are apartments, not bungalows or other self-contained units within the ‘village’ and the possible attraction of downsizing to one of these could become even less appealing to certain types of potential occupants. Mr Wilson may be correct in his assessment that ‘vertical living works for older people providing the design is right’ but many downsizers will feel that their quality of living is enhanced if they still have the chance to own their small patch of outdoor space. Then there is the Sales Administration Fee (sometimes known as the ‘Exit’ fee) when you come to sell. This is usually around 1%, which will need to be paid on top of any agency fees for actively marketing the property.
Another consideration for those 33% who might be thinking about downsizing, is the whole system of conveyancing in this country, which can result in lengthy chains with seemingly endless delays whilst others in the chain sort out mortgaging or other finance. Perhaps the banks might consider some reasonably-priced bridging loans for those with large amounts of equity tied up in a home which may take some while to market and then sell. Perhaps too, the Government should revisit its inheritance-tax ‘carrot’ regarding family homes. Downsizing, this proposed exemption would presumably be lost?
Personally, I find the idea of an entire village full of ‘old’ people entirely unappealing. Surely as an older person it is much more stimulating to be surrounded by those of all ages and stages of life, particularly the young? The possibility of spending up to thirty years in an environment which sounds like a cross between a cruise, a holiday camp and a nursing home does not appeal. Where do grandchildren fit into retirement apartments with their lack of gardens and almost certainly lack of storage? With many older people now looking after grandchildren, this is going to be a consideration for some. Of course the fact that 33% of people wish to downsize, suggests that 66% are not looking to do so and that many would be happier getting older where they already live, pursuing their interests amongst those they already know. They should neither be regarded as ‘trapped’ in their large houses, nor viewed as selfish for choosing to remain. If at some point they wish to ‘rightsize’ then they may prefer to do so simply by buying a smaller property in their locality, rather than a specially designed ‘pensioner home’.
Perhaps my views and those of others of my generation may change by the time we reach our eighties. By that time the retirement housing market will also have changed. Nigel Wilson’s ambitious measures to help get the whole market moving will undoubtedly be given serious consideration and no doubt Legal and General, which it has to be said has no direct interest in house-building, will increase its share of the equity release market for those who wish to stay in their homes and ‘unlock unproductive housing wealth’. What perhaps should be emphasised in any debate over the needs of Last Time Buyers is the difference between retirement living and assisted living. They are not necessarily the same and neither are the same as that final step, the care home. As with much that relates to the final stages in our lives, we in the West in general and the UK in particular do need to be prepared to discuss the necessities, needs and wants with honesty and without sentimentality or hypocrisy. In the meantime, I’ll just go and sort out my ‘spare’ rooms so that my mother and two nieces can come and stay.
