This is a brief thought piece because as a former student of Economics, I like to look at numbers and statistics and to see if there are any trends that could impact the future. Demographics is one thing that can play a huge role in property markets, because the age distribution of a population can impact on how many new entrants there are to replace the last generation and take on the ‘debt’ to keep the market functioning - just ask the Japanese, their ageing population has led to stagnant house prices for over two decades. Mark Twain famously said ‘The only two certainties in life are death and taxes.’ At Ashtons we believe that having an eye on the future is what keeps you ahead as a business and we want our clients to be ahead of the curve in their estate planning as there is a demographic time bomb on the UK’s horizon and planning for the future could save a huge tax bill for your family.
The ‘Baby Boomers Time Bomb’ is the result of a huge spike in the UK birth rate after the second world war and the impact that the maturing years of those born between 1946 – 1964 will have on the UK economy as they inevitably get older.
It is one of the reasons that successive UK governments turned a blind eye to immigration so as to have the population to replace this cohort in the workforce and to provide the additional people to ‘take on bank credit’ to keep the banks going.
The ‘Baby Boomers’ are now retiring in large numbers, reducing their spending as their incomes reduce and at a time that inflation has been rising. Many of the Baby Boomers have done very well out of exponential property price rises but they also represent a huge portion of homeowners in the market. 35% of homeowners are over the age of 65, and 56.2% are over the age of 55.
The low interest rate environment between 2008 and 2022 reduced the number of sellers in this cohort, why would they sell when their house price was rising fast and if they did, interest rates on any cash equity released was so low there was hardly any point.
The challenge ahead for many of the Baby Boom generation will be that of timing.
If you want to leave a legacy that doesn’t get gobbled up by HMRC, how long to do you leave it before you downsize? If 35% of homeowners are over the age of 65, the next 10 years could see quite a lot of people cashing in property for retirement and that doesn’t even take into account those homeowners nearing retirement who are still carrying mortgages that will need to be cleared.
The Baby Boomers Time Bomb could have an explosive impact on the UK housing market and affluent housing markets like Hertfordshire could experience some significant changes as a large sector of society look to cash in on the market. There could well be some amazing family homes to choose from over the next few years!