Downsizing could be actively encouraged
WHAT impact will raising the inheritance tax threshold have on the property market?
In the Summer Budget, the government announced it would increase the threshold on inheritance tax to £1 million for married couples and those in a civil partnership by 2020/21, phasing in the additional relief from 2017/18; reflecting the extent to which housing contributes to private wealth in the UK.
Indeed Savills’ analysis suggests the over 65s hold roughly 44% or £1.2 trillion of the equity held in owner occupied housing.
The increase of the inheritance tax threshold may discourage people from downsizing (although the relief for those choosing to downsize is protected).
This will result in the underoccupation of family homes and is likely to fur ther impact the quantity of family housing coming to the market. As a result, it is likely to underpin house prices – especially across the South of the country where historically the IHT burden has been highest.
It also means that younger generations who may rely on the release of this equity to move on or up the housing ladder will not have access to it until mature homeowners pass away and at a later stage in their own lives.
Actively encouraging downsizing in other ways, with the introduction of relief on stamp duty for example, may ease this situation. As would increasing the stock of good quality retirement housing.
It is with this in mind that Savills has launched Retirement Living, a new service stream devoted to the retirement sector.
The team is the first of its kind for a UK property company and includes development, planning and healthcare specialists.