The number of pensioners preparing to “downsize” into smaller homes is expected to double over the next 18 years, as older homeowners take advantage of newly attractive incentives to move.
However experts have warned that the UK still remains deeply unprepared to house the expected rising numbers of older people, leading to calls to the Scottish Government to prioritise the question of retirement housing.
A study by the sheltered housing specialists McCarthy & Stone found that 38% of pensioners in Scotland (374,000 people) are considering moving to smaller homes, a figure it expects to double to 754,000 in 2035.
The incentives for moving into a smaller home include the Land and Buildings Transaction Tax (LBTT) exemption bonus, whereby 79,000 extra adults aged 65 and over could be encouraged to move in the region with an LBTT exemption to further stimulate activity in the housing market. There is also what the firm calls the “housing chain impact”, a downsizing boom that is expected to release homes in the region with a combined value of £33 billion.
Older people in Scotland expect to release £74,000 (£73,992) of equity on average when downsizing, equalling £27.7bn in total.
The figures were published in McCarthy & Stone’s annual Retirement Confidence Index (RCI). Developed in conjunction with pollsters YouGov. The Scottish figure of 347,000 people looking to move or being encouraged to move with an LBTT exemption, compares to 5.6 million across the UK in total.
The number downsizing is set to increase as the UK’s population rapidly ages, according to McCarthy & Stone, which highlights the urgent need to focus on the UK’s preparedness for the future downsizing exodus.
Commenting on the findings, Clive Fenton, Chief Executive Officer at McCarthy & Stone, said: “The rise in the number of those who want to downsize is an inevitable consequence of our rapidly ageing population. Within the next twenty years, those aged 65 and over are expected to grow by almost 50%, which will expose the UK as a whole with grossly inadequate levels of retirement housing if we maintain the current status quo5. With over 11 million people looking to move in future in the UK – and three quarters of a million in Scotland alone – the Scottish Government needs to put specialist retirement housing and other forms of accommodation for older people higher up the agenda or we simply will lack the necessary infrastructure and support services, particularly from a health and social care perspective, to deal with such a huge demographic shift.”
We at Blair Cadell think that unless the Finance Secretary, Derek Mackay acts on his comments in June this year of reviewing the LBTT, the Scottish property market will not be fully functioning and purchasers will not be really available to buy the larger homes of the over 65s.
The property market is stagnating, particularly at the high end of the market, over £500,000 and this has been caused by the introduction of the LBTT in 2015 by the Scottish Government and particularly the bands of 10 per cent between £325,000 and £750,000; and 12 per cent on properties costing more than £750,000.
If people can avoid it, they are not putting properties over £500,000 on the market as there is pressure on the value of the property as purchasers are having to find extra tax which they cannot borrow from the lender, so it is from equity in their homes or savings.
Derek Mackay said in June he will think about raising the 5% threshold from £325,000 to £500,000 but we do not see this as having much affect at all as the stagnation is in homes over £500,000.
The proposals should be to bring LBTT in line with the SDLT in England. For a single property purchase, no SDLT will be paid on the first £125,000. Between £125,000 and £250,000 buyers will pay 2% within this band, 5% on the portion between £250,000 and £925,000, 10% within the next band up to £1.5 million and 12% over that.
We await further comment from The Scottish Government but we see no real changes in the stagnating property market without action from the Government. We also believe The Scottish Government will be losing £800 million in tax receipts over the course of the government due to the introduction of the new LBTT bands.
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