David Alexander: Lords report could prompt housebuyers to rent
The report, On Public Service and Demographic Change, placed much emphasis on how many members of the UK’s ageing population in need of long-term care were “asset rich” in terms of their homes and the need to “make it easier” for them to release the cash tied up in property through equity release.
This message is a further implication that equity tied up in home ownership will no longer be allowed to “cascade down the generations” as a former prime minister, John Major, once put it. Therefore, rather than pass on the wealth tied up in their homes to their children, homeowners will be required to ring-fence this to pay for healthcare in old age.
This will make future generations think twice about owning their homes. They will ask: “What is the point of making sacrifices to pay a mortgage if the state requires me to use my nest egg to pay for my care in later life?”
The report notes that current equity release schemes are expensive and, at times, cumbersome and wants to make them easier. But for whose benefit – elderly home-owners or a government keen to share in their assets?
There may come a time when many people will decide to choose the flexibility and lower overall cost of fees and outlays that come with renting homes. This scenario is possible should interest rates rise and property rentals become a mass market industry which will inevitably bring cheaper rents, pro rata, through more efficient management and economies of scale.
Owner-occupation is popular for several reasons, one key factor being the wish of people to provide, eventually, an inheritance for adult children. If it becomes easier for future governments to eat into this inheritance to help fund long-term care then folks are going to question the sacrifice should buying become appreciably more expensive than renting.
• David Alexander is managing director of DJ Alexander, the Edinburgh – and Glasgow-based letting and estate agency.