There’s little doubt that downsizing is less of a factor in the housing market than it used to be - so should more be done to encourage it?
For estate agents the answer will almost certainly be yes, and for good reasons.
Downsizers are usually cash-rich so fall-throughs caused by mortgage-related problems are very few; anecdotally, agents tell me downsizers view fewer properties and are more focused than younger buyers, so are easier and quicker to deal with; in addition, they have likely been through several house moves so know the ropes and are deterred less by surveys, EPCs or other possible hiccups.
However, problems and deterrents still exist for this group: stamp duty is one issue, of course, and there is a reported shortage of specialist retirement housing (although many of the examples of this I see in my professional capacity take months or years to sell, suggesting that in reality asking prices and service charges may be unappealing).
Increasingly, though, an attractive alternative to downsizing is equity release.
Once ER had a bad name but no more - it’s increasingly regulated and rip-off merchants common in the 1990s have long gone, thankfully. As a result, it’s growing...and quickly.
Last month the Equity Release Council revealed that this market is no longer niche.
Owners aged 55-plus unlocked a record £971m from their homes in the second quarter of this year, between April and June. Lending in the period increased by 12 per cent compared with the first quarter of 2018 - when £870m was lent - and by 39 per cent year-on-year from the second quarter of 2017.
This latest quarterly increase was broadly in line with the average 11 per cent growth seen from quarter to quarter since Q1 2016 - the Equity Release Council says this shows that ER “has taken up a position as a mainstream financial solution in later life.”
Good for the Equity Release Council and no doubt good for the individuals who have released all that money for their later life. But here’s the thing - should it be taxed?
One agent recently door-stepped me saying it should be taxed, to provide something like a level playing field. His argument goes like this: “Downsizers are taxed with stamp duty and the costs of moving - those taking equity release are not. Where’s the fairness in that?”
There are pros and cons of course.
Firstly, anything that an older owner does with his or her released equity will be taxed (and that applies whether they put the money into savings or buy a Maserati).
Secondly, if you tax equity release because, say, it may be unearned income ... well, what about taxing all the other people who make money through appreciation of their property? They too will be enjoying unearned income.
On the other hand, there is little doubt that downsizing is declining - and that this trend spells bad news for society as a whole, not just for estate agents wanting the instructions.
Research in recent years by the Nationwide has shown that 49 per cent of homes have two or more spare bedrooms; the government’s own English Housing Survey 2014/5 says 51 per cent of owner-occupied homes in England (7.3m) are under-occupied, up from 39 per cent back in 1995/6.
And all the while, as we know full well, there is an overall shortage of housing - made worse, undoubtedly, by equity release encouraging older owners to stay put.
There are no easy decisions in this debate and it pays to tread carefully.
There was uproar a few years ago when a think-tank was a little heavy-handed in the wording of a report which hinted that older owner occupiers should be obliged to move to a more appropriate-sized home. This was despite the fact that the social housing sector has for many decades had specific criteria on what constituted under-occupation, and councils and housing associations have been forceful in imposing such rules.
Yet just because this is a sensitive issue doesn’t mean it should be avoided.
We’ve got a housing shortage, and as an industry we know a shortage of stock is holding back not just ‘the market’ but thousands of families who would buy freed-up larger homes.
Should we tax equity release? At least we should debate it...
*Editor of Estate Agent Today and Letting Agent Today, Graham can be found tweeting all things property @PropertyJourn