Changes in the present-day housing tenure could have significant implications for older generations in the future.
According to the Office for National Statistics’ (ONS) ‘Living Longer: Changes in Housing Tenure Over Time’ article, the changing trends in home ownership could put a huge strain on retirees in the future.
Currently, almost three quarters of people over the age of 65, owned their property outright in 2017. This statistic had risen from 56% in 1993 as more people have since taken advantage of right to buy and consequently paid off their mortgages.
The most common tenure for 16 to 64 year olds is still owning property with a mortgage (40%). However, younger people buying with a mortgage is on the decline and the average age of a first-time buyer rose to 33 in 2019.
Middle age groups are now more reliant on the private rental sector with people aged between 35 and 44 three and a half times more likely to be renting in 2017 than in 1993. Overall, this age group’s reliance on rental accommodation has increased from 8.2% to 27.6% during this time frame.
As this trend continues, more pressure is placed on pension security. ONS research suggests that homeowners who own their property outright in retirement can currently maintain their living standards on a total pension pot of £260,000.
However, those renting into retirement will always need to cover their rental obligations and are predicted to need a pension pot of more than £445,000, almost £200,000 more than homeowners.
The perceived inaccessibility of the current property market has led 82% of non-homeowners to prioritise travelling, paying off student debts and raising a family above saving for a home, according to ING International.
The survey also suggests that 71% of British non-homeowners think it is better financially to rent rather than own a property.
Furthermore, 39% feel as though they will never be able to afford a mortgage and are resigned to renting privately.
Much like the impact Right to Buy had on property ownership in the 1980s, it seems as though it will only be through schemes like Help to Buy and the Government’s new First Homes which will help improve the current trend in housing tenure.
Without intervention, affordability will remain an insurmountable issue and could mean the retirees of the future will need greater intervention to help with retirement costs.
Jessica Exton, a behavioural scientist for ING International, said:
“Lots of us want to own our own home one day. Not only because it’s considered to be a smart financial decision, but because home ownership is an emotional and personal goal.
“But because property is so expensive – and there is a perception it will become more expensive – people are taking longer to save for a deposit and buying later in life.
“Given these extended time frames, it’s not necessarily surprising that many are finding additional reasons both to spend and save in the shorter term. Funding travel today, while planning to buy a home soon, for example.”
Chris Knight, Chief Executive Officer, Legal & General Retail Retirement, said:
“Living longer: changes in housing tenure over time: “These figures* have interesting implications for the lifestyles of tomorrow’s retired people.
“While most of the UK’s current over 65s are owner occupiers, the Office for National Statistics has indicated that a larger proportion of people of retirement age will be in the private rental sector in the future; this is due to the changing trends in homeownership of people currently in their 30s and 40s.
“However, these forecast statistics seem to be only an extrapolation, comparing the actions of the current generation with the previous generation. It’s also very possible that tomorrow’s retired people will adapt in different ways, such as entering the housing ladder in later life and borrowing into retirement.
“Whether it be preparing to rent later in life or maintaining mortgage payments into retirement, the one thing that these figures make clear is that younger people will need a sufficient retirement income in place so that you can both meet these costs and also pursue the other ambitions they have for their later years. At Legal & General Retail Retirement, our mission is to improve the lives of people in retirement and build a better society for the future; part of that is by anticipating how people’s needs are likely to shift over time.”
