With good reason, a lot of energy and activity is focused on and around Budget announcements, particularly in our sector because – as we know – government decisions can make a huge difference to activity, demand, sentiment, etc.
This year’s Budget – on the 6th March – feels no different in that respect, and actually might well have the potential for some sizeable ‘interference’ in the housing and mortgage markets, not least because government ministers have been talking so openly about what ‘might’ be announced.
In the early part of the year there was a focus on the potential for 99% LTV mortgages backed by a government guarantee, Michael Gove has been talking a lot about more support for first-time buyers, with speculation on a replacement for Help to Buy for this specific buying demographic, plus of course the wider discussion about housing supply and how the government might support greater numbers of homes.
Stamp duty, unsurprisingly, always figures prominently in discussions around the Budget, not least because we’re all aware of the significant boost this can give to activity, particularly purchasing. This isn’t just the case for residential purchasers either, but also in the PRS sector, where any stamp duty holiday is often acted upon by landlords and investors, quite simply because they are already paying 3% extra in stamp duty costs when buying.
It has been interesting however to hear of the ways a stamp duty incentive might be utilised at the other end of the marketplace, namely in support of those older homeowners who might wish to downsize, but are put off by a number of factors.
A recent research piece from Pegasus covering homeowners over 55 years of age suggested it is the costs of paying stamp duty and the hassle of moving that are putting people off from downsizing the most.
37% cited the hassle, 35% said the cost of stamp duty, while 26% suggested a lack of suitable housing was the main barrier. Again, this is understandable, because in a true sense these are all related factors.
The other question around downsizing is what these homeowners are trying to achieve. Of course, many people reach later life with larger properties which they no longer utilise in the same way – perhaps children have left the nest, or in many cases, the property becomes unmanageable, or indeed it no longer ‘works’ for those concerned.
These are the sorts of reasons why people want to downsize, but I suspect many will also be looking to put themselves in a much better financial position. Perhaps they have sizeable equity within the property which could be better utilised and they want to improve their standard of living, or they want to treat themselves or loved ones, or they want to do all of this and then some?
Then there are those who really need the equity they have in their home. Recent research from Savills estimates downsizers in England and Wales could secure, on average, £305,090, moving from a four-bedroom to a two-bedroom home, and given many people do not have adequate pension provision, or are having difficulty funding lifestyles on fixed incomes, this sort of money is not to be sniffed at.
Of course, we now have options available to older homeowners which mean they may not have to leave their home at all, but clearly when it comes to lifetime mortgages and the like, this is about releasing only a percentage of the equity rather than the whole amount, plus many people might want to downsize to a smaller, more manageable property anyway rather than staying put.
It seems somewhat self-evident that we shouldn’t have a taxation system which actively puts these people off selling/moving, because the costs involved are deemed too large. Neither should we be putting obstacles in place of those who would like to move, because historically this has been the way in which large numbers of families were able to move up the ladder into properties which were suitable for their growing needs.
In that sense, a decision on stamp duty which helped more people to downsize would be welcome, and would I suspect have an impact. However, as we know, we would also need to marry this up with the need for suitable properties in the places where downsizers want to live, and this is likely to be a more difficult obstacle to overcome.
Certainly, from an adviser perspective, a boost in downsizing opens up a greater world of purchase mortgage advice opportunity, not just for the downsizers but certainly for all those who might be able to buy as a result of this one decision to sell.
As a sector we have become increasingly reliant on remortgage business to keep the wolf from the door, and therefore any boost to purchase activity should be welcomed, not just in terms of the mortgage advice income it can generate but the opportunity to look at all other ancillary sales.
We need people to move in order to keep the market moving. Perhaps a focus on downsizers right now could help us all.
Keith Young is managing director of Broker Conveyancing