Luton’s Over-50s Wealth Hits Record High as Generational Property Gulf Grows
The Luton property market is proving increasingly difficult for some younger Luton buyers, but mature homeowners have benefitted immensely from rising house prices in the last few decades.
How wealth is spread across the generations will always be a controversial issue, significantly as the Baby Boomers (those born between 1946 and 1964) and the older Gen X's (born in the late 1960s/very early 1970s) wealth has grown exponentially over the last two decades, compared to the wealth of the younger generation.
The over-50s in the Luton area have a record £5,074,863,750 in mortgage-free equity, twice as much as the total in 2011, underlining the generational gap in the Luton housing market.
Rocketing Luton property prices have helped mature homeowners more than ever, while high Luton house values and expensive mortgages are pricing out some Luton first-time buyers. Compared to those younger, the gap is quite stark.
Luton under-50’s own £702m of
mortgage-free property outright.
So, how exactly are properties split in the local area of Luton, how do they compare to the national figures and more importantly - what can be done about it?
For under-50’s in Luton:
· 6.2% own their own home outright, i.e. no mortgage, compared to 6.4% nationally.
· 34.2% own their own home with a mortgage, compared to 41.6% nationally.
· 15.2% live in social housing, i.e. council house or housing association, compared to 17.8% nationally.
· 44.4% live in private rented accommodation, compared to 34.2% nationally.
For over-50’s in Luton:
· 45.7% own their own home outright, i.e. no mortgage, compared to 52.1% nationally.
· 23.2% own their own home with a mortgage, compared to 21.1% nationally.
· 17.6% live in social housing, i.e. council house or housing association, compared to 16.5% nationally.
· 13.5% live in private rented accommodation, compared to 10.3% nationally.
The stats that jump out at me in the over-50 age range is over 1 in 10 people nationally are in privately rented accommodation, and over 1 in 5 of over-50s still have a mortgage (although that reduces to 1 in 16 by the time they reach the age of 65).
Campaigners have said the younger generation has been priced out of the property market and the goal of getting on the housing ladder has become an impossible dream for many. The wealth gap of the generations shows the older generations have been aided by increasing house prices, leaving their sons and daughters with few options.
So, should the mortgage-free older generation
of Luton feel guilty?
Well, I expect the older generation to be mortgage free. It typically takes around 25 years to repay a mortgage fully, and mortgages accumulate over time.
Consequently, it's unsurprising that older homeowners possess higher ownership and equity. Similarly, younger homeowners in the present are likely to accumulate more equity and ownership as they age.
Another intriguing observation is that younger individuals often inherit their properties as older people pass away. With the baby boomer generation experiencing a significant increase in mortality, this transfer of property is expected to occur frequently.
Neither should the Baby Boomers and Gen X’s feel guilty.
Many can remember mortgage rates at 16% in 1992.
Also, older Luton people faced more significant difficulties in obtaining mortgages when they were younger. They encountered strict caps on mortgage sizes and had to contend with considerably higher interest rates.
Additionally, the older generation in Luton tended to lead more austere lives in the 1960s and 1970s and saved more money.
When housing construction and supply were relatively robust, demand was constrained during that period. Consequently, Luton house prices were significantly more modest than today's soaring prices.
The present situation reflects the last three decades of stringent house-building restrictions imposed by every political party, combined with a flood of inexpensive money from the banking system since 2008 and substantial immigration (who also require housing and age over time).
As a result, an inevitable surge in British house prices has occurred.
Today, younger Luton people tend to delay marriage, postpone having children and pursue higher education. As a result, they enter the housing market at a later age, but they generally express contentment with this arrangement.
As I said recently in my Luton property blog, first-time buyers have been on the rise lately, albeit their average age is now 33.4 years old (compared to 30.6 years old in 2005 and 23.6 years old in the 1960s), meaning they won’t be paying off their mortgage until later in life.
What could be the answer(s) to help solve this issue in
the Luton property market?
One is to build more houses – and that requires a willingness as a society to build on land that many might not want to build on (a political hot potato at the best of times!).
Secondly, we need to help older Luton homeowners to downsize, freeing up their larger homes for younger generations.
Most over-50s live in average-priced family properties
with no enticement to downsize.
Their children have flown the nest, and they rattle around a house often too big for them (as I discussed a few months ago and many have homes with two or more spare bedrooms). This country requires more bungalows and suitable houses for mature homeowners' lifestyles.
As a society, we need a discussion between the generations on how the £3 trillion of mortgage-free equity tied up in property owned by those who are 50 years old and above can be used to help the younger generation (i.e. their children and grandchildren), theoretically improving their prospects of affording their own home.
These are interesting times ahead. What are your thoughts on the matter? Do share your thoughts in the comments.