Focus on last-time buyers would free up UK property says report

Target last-time buyers for a better solution to the UK's shortage of property. That's the solution offered by a new report from researchers at the University of London.

The report says government housing policy focuses too much on first-time buyers. Re-focusing towards those looking to downsize or make their final property move should become a policy priority.

The research has been carried out by Professor Les Mayhew of Cass Business School at the Centre for the Study of Financial Innovation.

Financial industry has significant role to play

It points to the significant role that the financial services industry can play in encouraging older homeowners to move out of larger properties, freeing them up for families and in turn making smaller, more affordable properties available for those on the lower rungs of the property ladder.

Professor Mayhew calls on lenders to expand the number of mortgage products and insurance policies they currently offer that would then help older homeowners monetise their housing wealth.

Accessing the wealth in their property would then help older homeowners fund their retirement and also cover any future care costs.

Demand growing for suitable homes

The report was prepared in conjunction with challenger bank Aldermore, a specialist lender.

With a growing population and rising demand for fewer properties, the report points to analysis that says the demand for homes could add the equivalent of two new towns, each with 100,000 homes, every year for 25 years.

Household sizes are also shrinking. In 1980, there were 2.48 people living in each dwelling in the UK. Today that figure is 2.36, meaning there are more households, eating up any spare capacity in accommodation.

However, Professor Mayhew's report points out that the UK is not short of housing but short of the right sort of housing with too many older people continuing to live in houses that no longer suit them. The lack of affordable alternatives of suitable quality and size adds ensures they stay stuck.

Encourage older homeowners to sell up

His recommendation is that government policy should be focused on encouraging last-time buyers to downsize, using changes in the planning system and tax incentives to encourage older homeowners to sell up.

He suggests a more efficient approach could reduce the need for new homes by up to a quarter every year. The government has already set a target of 300,000 new homes in England alone by the middle of the next decade.

Professor Mayhew said: "The UK population is growing and also rapidly ageing thanks to improvements in life expectancy.

"A better alignment of the housing stock with housing needs, along with improved financial incentives, would significantly alleviate housing pressures to the benefit of all."