Elderly Care Crisis: A Tipping Point

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Elderly Care Crisis: A Tipping Point

The UK’s ability to support tens of millions of elderly people will collapse by 2029 unless the government takes decisive action.

There’s been talk about a care crisis for many years– consecutive governments haven’t committed to investment and reform and we’re still waiting for a green paper promised back in 2017.

The UK has an ageing population. Many of these people will need support from the social care system and are unaware of the sizeable costs of care – and they aren’t planning for it. The impact on both the individual and the system doesn’t look promising.

The lack of retirement, care housing and assisted living schemes coupled with the shortage of both care and nursing homes means greater burdens. Those providing elderly care services have been pushing for greater funding to maintain their standard of care for many years, but instead we’re seeing record rates of insolvency in residential care homes. Demographic change is also putting pressure on the UK social care system’s capacity. These pressures are reaching a point where industry bodies expect an imminent crisis of under-provision and worsening care quality.

Having taken a deeper look into the causes of the pending care crisis, our research has revealed a tipping point of 2029 – a time when underfunding and a lack of capacity will culminate in an unmanageable situation for care providers.

With less than a decade to act, the urgency with which the government needs to address the stabilisation of the care system is critical. This action is vital if we’re to prevent the crisis reaching a tipping point.

While much of what the system faces can only be remedied with government intervention, individuals and their families must treat planning for their later life, and the realities of paying for care, as a priority.

Kelly Greig

Partner and head of later life

Executive Summary

We commissioned Cebr to investigate the elderly care crisis facing the UK, and their findings confirm a dismal forecast for the future unless we take action now.

Cebr looked into a number of key themes causing the crisis and have predicted how things will develop over the next decade – unless we see major change on the horizon.

The research shows a sad, but not altogether surprising prediction, that we are heading for a crisis point in 2029 if no action is taken. At which point underfunding and lack of capacity will culminate in an unmanageable situation for care providers and those reaching old age.

Our experts have come together to consider the impact of the elderly care crisis and look at the issues we need to overcome if the future is to be a brighter one.

Overcoming the challenges

Elderly care is a subject that we care deeply about and one that’s created plenty of debate and discussion.

However, our focus is always on what we can do, not what we can’t, which is why we’ve provided commentary throughout the report – looking at the issues facing us all and more importantly what we can do to overcome them.

The sector is in desperate need of reform, it’s time for a change and we’re here to help. We end our report with recommendations that we believe will alleviate, if not avert, the impact of a collapse in 2029, benefiting generations young and old.

There are changes we can all make now to help us in the future, but some are out of our control. We’re calling on the government and local councils to:

  • Review and reform the care funding system
  • Change the eligibility criteria for support in paying for care
  • Require councils to plan and allocate land for retirement, care and nursing homes
  • Educate workers on the importance of pensions savings
  • Support informal carers looking after elderly

With care providers being increasingly stretched, the government needs to increase its efforts to prevent the crisis from reaching a tipping point.

Kelly Greig

Our Key Findings

Demographic changes and rising life expectancies mean that more people will need elderly care in the future, and need it for longer.

People often pay for their old age care with their pensions but they’re simply not saving enough.

Government funding isn’t rising enough to meet the demand. In 2018, the Local Government Association estimated that adult social care services would face a £1.5 billion funding gap in 2019-20, increasing to £3.5bn in 2024-25.

In England, you only qualify for support in paying for care from your local authority if you have less than £23,250 in savings or assets. This number has been frozen since 2011, meaning the threshold has fallen in real terms and people are missing out on funding.

The UK will face an upcoming shortage of elderly care accommodation. Current nursing and care home capacity is around 460,000 beds. If we don’t increase this, it’ll run out by 2029.

Many elderly people are turning to friends and family to help them pay for care. 18% of adults with elderly loved ones receiving professional care have helped to pay for it – that’s 4% of all UK adults. The average amount is £5,900.

Fewer pensioners will get defined benefits pensions over the next decade, making it even harder for retirees to pay for care.

The situation is so desperate that we estimate the average worker would have to save £575 more per month to be able to fund a moderate retirement. While this figure isn’t realistic for many of us, even a small increase in savings could make a huge difference.

Everyone should have a financial plan that adapts to meet their current and anticipated needs.

Richard Potts

Much of the focus is on the year 2029 which isn’t far away, but it’s still not too late to be able to make a real difference if change is made in a structured way.

Guy Sackett

We forecast that the real cost for nursing homes will increase 16.1% over next ten years and the cost of residential homes will increase by 14.9%.

45% of councils haven’t sufficiently planned for where elderly people in their communities will live, suggesting they may be unable to deal with future demand.

Only around the top 10% of retired households by income can afford to pay for nursing homes using these funds.

People aged 65 and over could release£1.2 trillion in equity by moving out of homes with two or more spare bedrooms.

The majority of care home residents are aged 85 and over. However, their incomes are far below the cost of residential care and aren’t expected to rise in line with fees in the coming years.

Homeowners could release a significant amount of equity from their homes to fund their care. This could mean selling homes with spare bedrooms, downsizing to a smaller property, or moving into retirement accommodation.


We’ve identified a point when the elderly care sector will reach its tipping point, due to a severe lack of funding and under-capacity.

Unless the government steps in before then, many elderly people won’t get the quality of care that they need

Moving is expensive, and the government hasn’t provided the same level of encouragement to downsizers as for first time buyers.

Jeremy Raj

Funding levels have decreased at a time where care is needed more than ever before.

Mathieu Culverhouse

Introducing Our Experts

We have a long established reputation for offering legal advice to the care sector. Our experts are passionate about the wide range of issues and want to use their experience and knowledge to make a positive difference. Throughout the report, they share recommendations on how the government, local authorities and each and every one of us can help.

We’ve seen signs of elderly care heading towards a crisis for some time, which is why the findings, while worrying, aren’t unexpected. There are solutions to the problems but we need to work together and act fast to drive change that’ll benefit millions of people across the country.

Foundations and Themes of the Crisis

This chapter investigates and analyses six of the fundamental factors and themes of the elderly care crisis.

It’s important that we all accept and anticipate that a move into care is a possibility for us in the future, and preparing for that will mean far less impact on our loved ones.

Kelly Greig

These factors are:

 A lack of pension savings

The UK’s ageing population

Insufficient council funding and planning

Reliance on friends and family

Shortage of elderly care accommodation

Equity held up in homes

Total active occupational; pension membership increased to 17.3m in 2018

A Lack of Pension Savings

An individual’s pension is the primary source of income for their years spent in retirement and is often needed to cover the cost of care.

The UK’s pension policies have had a significant shake-up over the past decade.

In 2011, the default retirement age was scrapped, meaning that employers couldn’t retire employees when they reached 65.

Since 2012, employers have had to automatically enrol their eligible workers into a pension scheme and contribute to it.

In 2015, pension freedoms let retirees decide for themselves how they want to use their pensions. People no longer have to buy an annuity when they reach retirement age, but can choose to take their pension as a cash lump sum or drawdown.

Employers switching from defined benefit pension schemes to defined contribution schemes is one key trend in retirement incomes over the past twenty years.

Private sector businesses have drastically scaled back on offering defined benefit schemes due their very high costs. These schemes pay a retirement income based on the worker’s final salary and number of years they have worked for the company.

Defined contribution schemes are now standard practice for businesses instead. In defined contribution schemes, employees and employers jointly pay a share of the employee’s pre-tax income into a pension pot which they can access when they retire.

In 2006, 3m private sector employees were contributing to or working members of a defined benefit scheme. By 2018, that number had fallen to 1.1m.

On the other hand, active membership of private sector defined contribution schemes increased from 1m to 1.2m between 2006 and 2013. It then increased again to 9.9m by 2018 due to automatic enrolment.

Including the public sector, total active occupational pension membership stood at 17.3m in 2018 – double the 7.8m active members in 2012.

Just because defined benefit provisions have fallen it doesn’t necessarily mean that individuals will have significantly lower incomes if the right decisions are taken early enough. More education is needed about the need for financial planning. Pensions aren’t the only assets you can use when paying for elderly care.

Richard Potts

Occupational pension schemes represent about 70% of workplace pensions. This suggests that the total number of workplace pensions stands at around 25m1. However, with 28m employees in the UK in 2019, it implies that many people still don’t plan for their future by paying into schemes.

While it’s promising that automatic enrolment has dramatically increased the number of people saving for retirement, it also suggests that many weren’t saving at all before the reform.

These people will have to save a higher proportion of their income in order to make up for the missed years of retirement savings. If they don’t, they could face very low living standards and may not be able to pay for care in retirement.

While they’re now only available to a relatively small number of private sector workers, defined benefit schemes are generally the preferred option. This is because they result in higher contributions being paid. For defined benefit schemes still open to new members, the average employer contribution rate was 16.2% in 2018 and employees added 6.9%. That’s far higher than the 2.3% employer contribution and 2.7% employee contribution averages for defined contribution schemes in 2018.

In April 2019, minimum contribution rates for defined contribution schemes went up to 3% for employers and 5% for employees, but average contributions are almost certainly still less. As workers on defined contribution schemes reach retirement age, they’ll likely have far lower incomes than pensioners on defined benefit schemes, due to these lower contribution rates.

1 Annual Survey of Hours and Earnings (ASHE) pensions release, 2018, ONS

The total contributions made in the 2017-18 financial year for the 10.4m members of defined contribution schemes came to just under £28bn. This suggests that on average, contributions from employers and workers combined come to £225 a month per worker.

The median level of total accrued pension wealth for households with a private pension was £114,800 for Great Britain in 2014-16. Households in the South East are the wealthiest with median pension wealth at £143,200.

Households in the East Midlands have the least saved in their pensions at £88,700.

However, households are likely to have saved up more than these median figures by the time they retire. This is because the value of pension savings build over time.

Evidence2 suggests that UK employees need £799 added to their pension pot every month over a lifetime to get a moderate standard of living when they retire. That’s about 26% of average full-time earnings.

While employers must currently put 3% of their employees’ income towards their pension, it still leaves 23% to the employee. Considering the average monthly pension savings amount of £225, this suggests that the average person has a monthly pension shortfall of around £575.

The evidence also suggests that savings of £1,755 per month would be needed to achieve a more comfortable standard of living. This would only be achievable for people with higher earnings throughout their life.

People need to save hundreds of pounds a month more than they currently are in order to have enough to live on in retirement. This is especially true for those who’ll have to pay for care, and those who weren’t saving for a pension before automatic enrolment in 2012.

26% UK employees need to save about 26% of average earnings for a moderate standard of living when they retire.

The UK’s Ageing Population

With people in the UK living longer, the growing demand for elderly care support has put a considerable strain on the sector. In 2020, the average 65-year-old man can expect to live until they’re 84, and 65-year-old women are likely to live until they’re 87.

In 2020, the projected number of people aged 65+ will rise to 12.6m and to 15.4m in 2030. People in this age category are expected to account for 22% of the total population in 2030, up from 19% in 2020.

The rising share of people of pension age means that the proportion of the population that’s of working age will fall. This is termed the old age dependency ratio.

This old age dependency ratio calculates the number of people of state pension age. In 2000, this ratio stood at 299, and seems to have fallen slightly since then, to 282 in 2020. This fall is partly due to increases in the state pension age for women. However, the Office for National Statistics (ONS) projects that it’ll rise to 310 by 2030 and 368 by 2040.

There are multiple factors causing this demographic change. When the modern state pension began, a

65-year-old could expect to spend 13.5 years receiving the State Pension before they died. This has now risen to over 21 years due to improved medical care and healthier lifestyles.

The post-war baby boom (roughly from 1945 to 1965) is now also feeding through into a larger retired population. Those born in 1945 will turn 75 in 2020, and the very youngest of this generation will be 65+ by the 2030s.

In response to these factors, the government has planned to raise the state pension age. Between 2010 and 2018, they raised the age for women from 60 to 65, in line with the men’s retirement age. Under current plans, the pension age for both men and women will gradually rise until it reaches 68 before 2040.

This demographic shift towards a larger number of older people creates both opportunities and challenges.

One key example of an opportunity is an increased number of experienced workers who’ll work later in life. Economic activity in the labour market for older people has been gradually increasing over the past few decades.

In Q2 1994, 62% of people aged 50-64 were active in the labour market. 25 years later in Q2 2019, this stood at 74%. The same figure for people aged 65+ increased by 7% over the same 25 year period to stand at 12% in Q2 2019.


It’s important to support older people in the workplace to realise the full economic benefit of the growing number of people working beyond 65. Policies to retrain workers and make workplaces more accessible will both help maximise the benefits for businesses and the economy. The state pension age rising to 68 will make these measures more important in the years to come.

However, 88% of people aged 65+ are inactive in the labour market – around 10.6m people. They all need income from pensions, savings, investments and the government to cover living expenses and if needed, the cost of care.

Currently, people over the state pension age can claim up to £168.60 per week from the state, totalling £8,767 a year. As the number of people claiming this money rises, so will the government’s total state pension bill.

The Office for Budget Responsibility’s latest estimate is that the government spent £96.62bn on state pensions in the 2018-19 financial year. This is forecast to rise to

£110.26bn in the 2022-23 financial year.


The taxpayer will have to pay the cost of state pensions. This means that younger generations must cover the cost of the pensions of the growing number of retired people.

The state will also pay higher costs for NHS and

state-provided care for older people, because while our lives are getting longer, the amount of years we spend in good health isn’t increasing at the same pace.


The 2009-11 Annual Population Survey (APS) shows that UK men at the time had a life expectancy of 78.5 years, with 15.8 years in “not good” health. Female life

expectancy was 82.5 years, with 18.6 years in “not good” health.


By the 2016-18 APS results, life expectancy had increased

by ten months for men and seven months for women. Healthy life expectancy, on the other hand, only increased by five months for men and actually decreased by two months for women. Therefore, Britons spent longer in poor health at the end of their life, taking up more healthcare resources, which working generations must pay for.

3 Future of an ageing population, Government Office for Science, Foresight, 2016

The burden of an ageing population isn’t just financial. An ageing population is associated with the verticalisation of families. This is where more generations are alive simultaneously.

Verticalisation can benefit younger generations through positive contributions from grandparents, such as caring for grandchildren. But it may also pressure people to care for elderly dependents for longer, especially as people live in poor health for longer.

Evidence also suggests that unpaid caring responsibilities currently fall on women more than men3. Therefore, the increasing elderly dependency ratio may affect women more than men.

Simply put, the UK’s ageing population contributes to the elderly care crisis because there are more elderly people. Evidence in this section also shows that rising life expectancies have led to people living in poor health for longer at the end of their life. This puts pressure on younger generations to support pensions and healthcare financially through taxation, and also to care for dependent relatives.

Insufficient Council Funding and Planning

Local councils play an important role in supporting the elderly with their housing and care needs.

This section of the report focuses on how councils:

  • Fund care for elderly people
  • Plan for and provide specialised housing for elderly

If an elderly person needs care, they may seek financial support to pay for that care from the state. Local authorities administer public support, which means there’s no nationally set budget. Local authorities must, therefore, make decisions about allocating funds to social care versus other public services.

The value of a house is included in the total value of a person’s wealth when they permanently move into a care home or nursing home. For most homeowners, this means the equity they own in their property, or value of their home, minus any outstanding mortgage.

The upper wealth threshold for local authority care funding increased to £23,250 in 2010-2011 and has been frozen since. This means that in real terms, the threshold has been falling.

The upper wealth threshold for local authority care funding increased to £23,250 in 2010-2011 and has been frozen since. This means that in real terms, the threshold has been falling.

Therefore, the criteria for the means test have become harsher over the course of the 2010s. People with a wealth of between £23,250 and £27,700 have effectively lost out on funding for their care.

Therefore, the criteria for the means test have become harsher over the course of the 2010s. People with a wealth of between £23,250 and £27,700 have effectively lost out on funding for their care.

61% of expenditure by local authorities for care of people 65 and over goes towards long term physical support.

17% is spent on long term support with memory and cognition.

Although government spending on adult social care has been rising since 2015-16, there’s evidence of a severe funding gap. 2018-19 spending was up by 2.6% on the year before, but still 4% lower than 2009-10 in real terms.

Rising demand for care homes suggests that the government isn’t allocating enough resource to meet the growing needs. The Local Government Association estimated in 2018 that adult social care services would face a £1.5bn funding gap in 2019-20. They estimated this gap would grow to £3.5bn in 2024-25.

Looking at local authority spending on adult care split by region, councils in the South East spend the most in total, at £3.0bn, of which around £1.2bn goes to care for people aged 65 and over. However, when dividing this figure by the number of people aged 65 and over in the South East, the average spend comes to £707 per year, lower than six other English regions. London has the highest spend on elderly social care by local authorities at £955 per 65+-year-old in the capital.

Tower Hamlets is the local authority that spends the most on elderly care per 65+-year-old resident. In the 2018-19 financial year, Tower Hamlets council spent a total of £44m on elderly care, up from £34m in 2017-18. This 2018-19 figure equates to £2,211 per resident aged 65 and over.

The funding system is difficult – local authorities have the obligation to fund those entitled, but they have no control over the amount of people requiring their services that live in their area. Therefore authorities that have an older population, especially in less affluent areas, will struggle to meet the needs.

Kelly Greig


This increased level of spending may reflect the fact that a relatively high share of elderly people in the area qualify for council support. At the other end of the spectrum, Leicestershire council spends the least on elderly social care per person in the county aged 65 and over, at £487. This may be due to the people who live there being wealthier.

People wishing to ensure that they will receive appropriate care in later life cannot assume that this additional funding will be provided by the government. They can take matters into their own hands by putting aside sufficient funds now to ensure that they can meet their own care needs.

Mathieu Culverhouse

Figure 2 – Council spending on care of people aged 65+ per person aged 65+ in region, 2018-19

















Cabinet minister says gut feeling is HS2 should go ahead as a ‘key part’ of Tory commitment to the north

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By Anna Mikhailova, Deputy Political Editor
26 January 2020.8.34pm

A Cabinet minister said it is his gut feeling that HS2 should go ahead as he said the project is a “key part” of the government’s commitment to the north.

A government source told the Telegraph that “quite a few” ministers share Stephen Barclay’s view that the project should go ahead. A decision on the high-speed rail link could be as soon as this week.

Mr. Barclay said: “We have a strong commitment to levelling up all parts of the United Kingdom. High-speed two is a key part of that – not just from speed but more from a capacity point of view in the line.

“And that is a very clear commitment we have given the North,” the Brexit Secretary added.

Asked on the BBC One’s The Andrew Marr Show whether his gut feeling was that the project should go ahead, he said: “Yes.”

Last week dozens of Tory MPs wrote to Mr Johnson to make the case for HS2, and requested a meeting with the Prime Minister.

Eddie Hughes, the Conservative MP for Walsall North in the Midlands, told the Telegraph: “As a former civil engineer I know how complicated big infrastructure projects can get. But this complexity shouldn’t stop us from being ambitious for our country.

“HS2 is essential to reducing overcrowding on our local train networks and when we’ve only just smashed the so-called “red wall” in the Midlands and the North for the first time in decades, literally the worst thing we could do would be to can the one shovel-ready project which can help these communities.”

Mr Barclay is the second minister in days to suggest HS2 will go ahead. On Thursday Baroness Vere of Norbiton, a transport minister, criticised “naysayers” who block big infrastructure projects and praised the “courage” of politicians who see them through.

Addressing the House of Lords during an HS2 debate, the peer said railways are built “for our children and our children’s children”. Baroness Vere praised “Victrorian pioneers” for building the train lines which form the “vast part of our national railway”.

The comments come despite concerns over the mounting costs of HS2. The project’s bill could reach £106 billion, according to leaked findings from a government-commissioned review led by former HS2 Ltd chairman Doug Oakervee.

Last week a report by the National Audit Office said HS2 is over budget and years behind schedule because ministers “underestimated the complexity” of the project.

The spending watchdog also warned it is impossible to “estimate with certainty what the final cost could be”.

Gary Sambrook, another Tory MP in the pro-HS2 group, said the project is “pivotal to levelling up our economy and we must push ahead with it.

“The benefits to Birmingham are already starting to be seen in our manufacturing supply chain and regeneration. Cancelling HS2 would cause unthinkable damage to the Birmingham economy and put so many investment projects, business growth and jobs at risk.”

The comments are at odds with another group of Tory MPs who have argued against HS2. Last week the group, which includes a number who broke Labour’s “red wall” in the north, have warned of the “devastating impact” of the project.

Appearing in a video posted on YouTube last week, they implored Mr Johnson to rethink HS2 and offered a list of alternative infrastructure projects to spend the money on instead.

These included a second phase of Northern Powerhouse Rail 2, linking Liverpool and Manchester, as well as delivering East-West Rail between Bicester and Milton Keynes.

One in eight care homes closes amid growing crisis in social care

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By Laura Donnelly, HEALTH EDITOR
4 DECEMBER 2019.8.00PM

One in eight care homes has been forced to close in the last decade while rising numbers of families are being forced to pay for care, a new report warns.

The study shows that the number of homes in the UK has fallen by 1,612 in ten years, despite a rapidly ageing population.

The report by analysts LaingBuisson also shows that 45 per cent of care home places are now funded by families, not the state, up from 40 per cent in a decade.

And it shows the number of local authority beds has halved over the same period, from 34,700 to 17,100.
In total, the number of care homes has dropped from 12,592 to 10,980 over the decade.

Boris Johnson has promised to “fix” the problem of social care, with a “cast-iron guarantee” he will have a long-term plan for social care in place within five years.

It follows warnings that families are spending twice as much on fees for relatives in care homes than they were a decade ago, research reveals.

In 1999, a Royal Commission on long-term care of the elderly, said that personal care should be free for all those in need, leaving pensioners to only pay “hotel” costs of their accomodation.

But in the two decades since, the subject has repeatedly debated, without reforms being introduced.

Since then, more than 350,000 pensioners have been forced to sell their homes to fund their care, research suggests.

Social care provision in England is means-tested, and those with more than £23,500 in savings or assets have to contribute.

Caroline Abrahams, charity director at Age UK said: “There are more older people than ever before but fewer care and nursing home beds compared to a decade ago, and that spells big trouble for anyone who needs this kind of help today, as many do. It’s high time the Government got a grip on the situation so whoever our next PM is must make this a day one priority, or else hundreds of thousands of older people & their families are going to be very badly let down.”

Number of new care homes outpaced by closures for eighth year

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By Vinjeru Mkandawire
27 December 2019.6.00PM

Care home closures exceeded openings for the eighth consecutive year in 2019 as the number of new facilities fell to a record low rate on record, despite a rapidly ageing population.

There have been more than 600 openings of care homes in England this year, but in excess of 900 closures, leading to a total loss of 23,452 beds, according to data commissioned by The Telegraph from the Care Quality Commission, England’s health and social care watchdog.

The decline in new homes being opened is in stark contrast to a decade ago when more than 7,000 sites were introduced and a year later when care providers opened more than 11,000 homes.

Experts said that poorer residents were bearing the brunt of a capacity squeeze as operators prioritise self-funders in affluent areas over loss-making homes in more deprived areas.

At the heart of the problem is a funding shortfall between the lower rates offered local authorities – which pay for most state-funded residential care for older people – and private players who typically pay 40pc more, according to estimates by healthcare research firm LaingBuisson.

The difference between self-funded and local authority prices means that people who pay for their own care are often charged more to subsidise residents sponsored by councils.

Caroline Abrahams of the charity Age UK said: “It would be of little concern if care home places were being reduced because of a government strategy that ensured people’s needs could be better met in other ways, but that is not what’s going on here at all.

“Instead, the market is voting with its feet and shunning state-funded clients and the places where they predominate in favour of taking on those who can afford to pay, in more affluent parts of the country.”

Fears are growing that homes could struggle to stay afloat in less well-off regions, particularly the Midlands and the north of England, where there are fewer private players.

LaingBuisson founder William Laing, said: “Smaller care homes are slowly exiting the market, and prudent investors have put a block on new development until more realistic fees are on offer.

“For now, the whole system will just about hang together. But as demand rises – which we believe it will – the system will run towards a disorderly series of local capacity crises and sudden price shocks.”

Laing added that many councils were feeling the pressure. “Some local authorities are already finding it harder to make local placements. As demand exceeds demand, local authorities will be forced to pay more – sometimes a lot more.”

Boris Johnson has pledged £5bn extra cash to social care and has promised to create a new funding structure for social care within five years.

During his election campaign, the prime minister also vowed to “end the injustice” of older people selling their homes to pay for social care services. It followed repeated delays to the publication of the government’s social care green paper.

Industry experts said that without urgent action and significantly more funding, the huge strain that has already been placed on the sector could spell disaster for the government which is looking to support the Midlands and North with billions of pounds of investment and a new regional agenda. They added that older people on low incomes in these regions would be particularly affected.

Ms Abrahams said: “Restoring social care to a level of decency right across the land needs to be central to the new government’s ambitions to strengthen our national infrastructure, in less wealthy parts of the country above all.”

What will happen to the property market in 2020, and will a Brexit deal boost house prices?

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By Melissa Lawford
26 December 2019,7.00AM

Many estate agents are hailing a property boom in the wake of the decisive Tory election victory. But market analysts do not agree.

The so-called “Boris bounce” will likely improve sentiment short-term, says Simon Rubinsohn, chief economist for the Royal Institute of Chartered Surveyors (RICS). “But I don’t think it will amount to a great deal.”

So what will happen to house prices and the property market in 2020? Will it be more of the same sluggishness as in 2019, or will there be a boost in activity?

Issues of affordability, coupled with the coming turbulence of the next round of Brexit negotiations “means the likelihood of a material pick-up in activity during 2020 seems unlikely,” according to RICS. It predicts modest growth of 2 per cent over next year, with sales volumes “broadly flat”.

Knight Frank, similarly, opts for 2 per cent growth in 2020. Halifax, predicts between 1 and 3 per cent growth. Zoopla estimates 3 per cent. Savills is more sceptical with a 1 per cent prediction.

Lucian Cook, head of research at Savills, is quick to emphasise that though the election result was decisive, uncertainty is set to stay due to negotiations over a future trade deal. Any bounce will prove “difficult to sustain through the summer months and into the autumn market,” says Cook.

And of course, the market will continue to be hamstrung by the problems that currently plague it.


While Zoopla predicts prices will go up 2 per cent in London in 2020, Savills says they will drop 2 per cent. Sam Mitchell, of online agent Housesimple, goes for “flat”.

The one thing that is consistent is that everyone predicts lower growth in the capital than in the rest of the country. This chart shows how Knight Frank expects London to fare (0 per cent growth) next year compared to other UK regions: it’s the clear loser.

But considering how slow the London market has been in the last three years, 2020 is looking relatively good.

The London picture “is likely to stabilise” in 2020, says Rubinsohn.

Zoopla’s chart below shows London’s house price to earnings ratio, which is still far higher than in cities such as Edinburgh and Manchester, but which has now fallen in line with 2015 levels.

Properties are still expensive, but buying capacity is now much better than it has been in recent years.

The election result will likely bring a boost in overseas buyers before the introduction of the 3 per cent surcharge on foreign purchasers, which is expected to be announced in the forthcoming Budget.

Though the general London stats are low, Savills and Knight Frank are both predicting a return to strong growth for the prime central (PCL) market, the most expensive homes in the capital. Savills expects PCL prices to rise by 3 per cent in 2020, and by 20.5 per cent between 2020 and 2024.

The recovery will be weaker than in previous cycles, says Cook, because of the higher costs of stamp duty and the nature of the market which has matured since the last boom.

The new-build sector is also set for change in the year ahead. The market stagnation in 2019 has meant that many developers have stopped building. “Volumes of new-build starts are going into reverse,” says Liam Bailey, head of research at Knight Frank.

New developments take time to build so there will be a lag, but “over the next two years there will be less new stock in London and the South East,” says Bailey. “Down the line, that is likely to hit entry level buyers, who tend to be more exposed to the new-build market.”

The rest of the UK

The North is the one to watch, says Rubinsohn. Its housing cycle is well behind London’s, so there’s still substantial opportunity for price growth. The most affordable regional cities will record the highest price growth, at 4 per cent over 2020, predicts Richard Donnell, research director at Zoopla.

Plus, Prime Minister Boris Johnson has pledged to spend billions in infrastructure here, in his bid to maintain the votes the Tories won from the “red wall”. Manchester, Liverpool, Sheffield, Leeds and Nottingham are all “likely to have a good year,” says Mitchell.

And though housebuilding has slowed nationally, there are pockets that will see “a large concentration of new completions from next year onwards,” says Oliver Knight of Knight Frank research – and they are primarily in the North.

The chart below shows the top 10 regions by the number of housing starts since September 2016 (and therefore likely to have the most completions this year). Manchester ranks top, while Leeds and County Durham follow close behind.

Savills picks the North West as the region where property will see the greatest capital appreciation over the next five years, and predicts growth of 24 per cent by the end of 2024.

Northern Ireland and Scotland have shown strong price resilience, which should be set to continue through 2020, says Rubinsohn. But things could change fast for both of their economic markets, depending on Brexit negotiations and the likelihood of another Scottish independence referendum.

Scotland, which has so far utterly bucked the UK-wide price growth slowdown, could lose its immunity in 2020, says Bailey. Until now, Edinburgh has been counter-cyclical in relation to London, says Bailey, with its high-paced growth occurring at times when the capital’s market has been at its weakest.

But it’s also a city that generally has a three-year lag time on the patterns in the London market, and the capital’s downturn started in around 2016.

Private rental market

Rent growth is due to outstrip price growth in the coming year. RICS predicts jumps of 2.5 per cent nationally, and by 3 per cent in London. Over the next four years, Knight Frank predicts jumps of 10 per cent and 15 per cent in national mainstream and London mainstream rents respectively.

Rental stock is low as many landlords have been selling up in the wake of the phased tax reductions on buy-to-let mortgages, the final stage of which will come into effect later in 2020.

There is a risk of “runaway rents”, says Donnell, unless reforms are introduced.

But will the rent jumps be enough to tempt back investors into the buy-to-let market? “We’re not there yet,” says Rubinsohn.

Beyond 2020

Though the short-term forecasts are timid, analysts are taking a bolder stance on the long-term view. Knight Frank predicts mainstream UK prices will grow by 15 per cent by 2024, while prime central London prices will rise by 18 per cent.

But the emphasis is on prime London. When it comes to mainstream property, the capital will be well-outstripped by regional markets, primarily those in the North – as illustrated in Savills’ five-year predictions in the chart below.

There will be a couple of key things to watch. First, any word on stamp duty could change everything – for the price saturated markets of London and the South East, at least.

Boris Johnson made a lot of noises about reducing the charges over the summer. They are ideas which he has since shelved, but they are more likely under this government than any other. Reform would give the market at least a “short-term boost”, says Donnell.

Another big thing on the horizon is the end of the Help to Buy equity loan scheme, which is due to end in 2023. The scheme supports two in every five new-build developments in England, says Donnell. The sector is completely dependent on it, as are many major housebuilders.

What’s more, says Donnell, nearly one in four schemes currently being developed will still be under construction in 2023. “There is a prospect of a cliff edge that could disrupt new housing supply.”

The Tories have announced plans for a programme that will give local people 30 per cent discounts on new-build homes. On the surface, this sounds like a Help to Buy replacement, except it’s supposed to be funded by developers (whereas under Help to Buy the government effectively subsidises developers).

The plan has worrying implications for affordable housing, but it also raises a question mark over what will fill the upcoming void in new-build funding.

Where have house prices grown the most in the last decade?

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In the 10 years since January 2010, house prices have risen in every single local authority in the UK except for three.

Hartlepool, Redcar & Cleveland, and Blackpool are the outliers that have bucked the trend: prices have fallen here by 7.8, 1 and 0.4 per cent respectively, according to analysis of Land Registry data by housing developer Project Etopia.

Incidentally, these are also the places that offer the highest rental yields for buy-to-let property in the country, according to Hamptons International.

But for the rest of the UK, in the 10 years of economic recovery that have followed the financial crash, the only way has been up.

Naturally, London is way ahead of the rest of the country, and is home to the steepest price jumps in the country.

In Waltham Forest, the top-performing local authority, the average house price in October 2019 was £424,655, according to Project Etopia, a 97.7 per cent jump on January 2010. Hackney and Lewisham recorded respective leaps of 95.2 and 90.2 per cent.

But the long-term measurement misses the fact that prices in the capital have declined in the last couple of years, primarily because they got so high they hit saturation.

The rest of the country provides a different story, and some more interesting ones to watch. Here are the decade’s top 10.

10. Broxbourne

Broxbourne is the first of four Hertfordshire local authorities to make the top 10. Average prices in 2010 started out at £209,605 and have risen by 69.7 per cent to hit an £355,800 by October 2019.
It’s a commuter area with some regal connections – Queen Elizabeth I lived in Cheshunt while she was a princess, and pop royal Cliff Richard used to live in Bury Green.

9. Southend-on-Sea

Essex also hogs a lot of spots in this list – three, to be precise, including (spoiler alert) the most important one.

But of these, the resort town of Southend-on-Sea surely has the most charm. It has a funicular lift connecting the beach to the high street, and a pier, built in 1830, that is the longest in Britain.

The seafront has had its share of the limelight, including an appearance in The Hitchhiker’s Guide to the Galaxy. This unnerves the protagonist Arthur Dent because it reminds him of a childhood nightmare: “All my school friends went to heaven or hell and I was sent to Southend!”

Read of that what you will, but the proof is in the prices. Properties here cost on average £290,592, which is 69.9 per cent more than a decade ago.

8. Hertsmere

Another London commuter hotspot in Hertfordshire, this one comes with more prime opportunities for celeb-spotting. It’s the home of Elstree Studios, which produces shows such as Strictly Come Dancing and, until recently, Big Brother.

After Big Brother finally called it a day, the house was slowly demolished this year.

You can relax with the hope that you’ll have some more well-mannered neighbours, but you’ll have to pay more for them these days: local prices have jumped by 70.3 per cent since 2010 and homes now cost an average of £460,526.

7. Corby

The Northamptonshire borough of Corby offers an elusive ideal: price appreciation is high – values have also increased here by 70.3 per cent over the time period – but property is still affordable. It is the bargain of the top ten, as homes in October 2019 cost just £186,205.

It might be in the East Midlands but Corby has long had a reputation as ‘Little Scotland’ due to the large number of Scots who migrated to work in the local steel industry in the Thirties. It hosted its own mock Independence Referendum in 2014 and Asda has reported that it sells more Irn-Bru here than anywhere else outside of Scotland.

6. Dartford

Dartford, the Kent birthplace of Mick Jagger and Keith Richards, has an average house price of £297,708 – a 70.6 per cent leap in 10 years, up from £174,465.

It’s come a long way since the days of the famed Swanscombe Man, whose 400,000-year-old skull fragments were excavated, along with some fossilised mammoth tooth, from the local archaeological site (and who, it was later discovered, was actually a woman).

5. Harlow

This Essex ‘new town’ was built after the Blitz and comes with an illustrious public sculpture collection, featuring works by Auguste Rodin, Lynn Chadwick, Henry Moore, Barbara Hepworth and Robert Koenig.

The star power is clearly wearing off. House prices have risen by 72.8 per cent over the decade to a total of £278,889, though they have a way to go to match Moore’s auction record of £24.7 million.

4. Bristol

Londoners are ditching the capital to buy into Bristol’s harbour-side lifestyle and better value homes.
According to Knight Frank, 5,441 Londoners moved to Bristol in 2018, a 65.5 per cent increase on 2013.

They are bringing their money with them. House prices have jumped by 73.6 per cent since 2010 to £291,708. Though according to Hamptons International, they’re still 48 per cent cheaper than in London.

3. Watford

Hertfordshire strikes again. Watford rings in the decade with an extra £182,564 added to its average house price since the start of the decade, bringing its numbers up by 74.3 per cent to £350,614.

The town is a key employment centre. It’s home to JD Wetherspoon’s HQ.

2. Three Rivers

Three Rivers might be in second place, but it has the crown of being the most expensive spot in the top 10 and completes the Hertfordshire monopoly.

It has a smattering of London Undergound stations and buyers pay a lot for the pleasure of an easy commute into the capital. Homes cost on average £539,183 here, having risen 75.2 per cent in 10 years.

1. Thurrock

It’s the Dartford Crossing, however, that has the real Midas touch. The winner of the decade, Thurrock, sits opposite Dartford on the other side of the Thames Estuary in Essex. It is an area that shares much with its neighbour across the river. For example, it too was once a grazing ground for mammoths.

But Thurrock wins hands down when it comes to price growth. Values have jumped by 76.2 per cent since 2010 to a total of £276,164.


The three places where house prices are set to rise thanks to the Tory election victory

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The election result has offered the one thing that the property market demanded: a return to certainty.

But there are other reasons why property markets could be kick-started as a result of the Tory majority. Property markets could indirectly benefit from a Brexit deal and the need to appeal to voters in newly-Conservative voting areas.

So where are the best places to invest to make the most of the Boris bounce? Here, we identify the three areas where, both in the immediate future and in the long term, as Brexit negotiations play out, property markets may get a much-needed boost.

Just days after the election, London is seeing a perk up of sorts. Super-prime buyers who were fearful of a government led by Jeremy Corbyn, or indeed just a government that included Corbyn, are now reassured that we have a government that won’t punitively tax their wealth.

Sure, the Tories are going to bring in a 3 per cent surcharge on overseas buyers, but for many this is relatively piddling. Chinese buyers “believe it is small compared to the punishment they might have received under a Labor government,” says Georg Chmiel, executive chairman of Juwai, which helps Chinese buyers find property overseas.

Plus, the increased political stability has brought an uptick in the pound that is making the market attractive to foreign buyers again. As much as they might like buying property that is good value, they don’t want to buy assets in a depreciating currency.

The Conservative win “seems to stand for business-as-usual in many respects” for Chinese buyers, who account for 45 per cent of investor visas, says Chmiel.

Experts predict a short-term uptick, as foreign investors move to buy property before the pound rises further and before the surcharge is likely announced in a new year Budget.

But any surge that is pegged to certainty will likely be stemmed by the next phase of the Brexit negotiations: there is probably a very bumpy ride for the UK ahead. And coupled with the 3 per cent surcharge, overseas buyers are unlikely to feel motivated to buy in London for long.

“There might be a short-term bounce,” says Sam Mitchell, the boss of online estate agency Housesimple. “A bit of demand will be flushed out,” says Mitchell, “but uncertainty will creep back pretty quickly.”

The North and Midlands

The best places to invest will be outside the capital. London’s market has been in decline because it hit price saturation – and unless wages go up significantly or the cost of moving goes down, that won’t change. Investors chasing capital appreciation should look north.

This election was historic because it saw so many Labour safe seats, such as Blythe Valley, Workington and Great Grimsby, turn Conservative. These Leave-voting constituencies gave their votes to the Tories primarily because of the party’s policy on Brexit, not because they’re naturally aligned with the Conservatives – and Boris Johnson knows it.

“The Conservatives are going to have to work hard to keep them,” says Mitchell, whose business is based in the North and Midlands.

As a consequence, Johnson has announced substantial spending plans. Chancellor Sajid Javid is able to borrow £100 billion over a parliament for capital investment; currently, only £22 billion has been specifically allocated, and the rest is planned for major infrastructure spending in the Midlands and the North.

The investment can only be a good thing for the property market, says Mitchell. Boosts to employment will naturally lead to higher wages. And though buy-to-let investors will still suffer the continued reductions to the tax relief on their mortgages under this government, higher wages will mean they can charge higher rents.


It’s not clear how things will work out for Northern Ireland in Johnson’s Brexit deal. But in the long term, Belfast’s role is going to change, becoming a new meeting point between the UK and the EU. Its property market could well be one to watch.

Prices in Belfast are relatively cheap: the average house price is £129,100, according to Hamptons International, half that of Edinburgh and 38 per cent less than in Cardiff. There’s room for price growth, employment levels are good and interest rates are low.

But the legacy of the Troubles has meant that out-of-town investors have steered clear of Northern Irish property, says Samuel Dickey of Simon Brien Residential. Mainland UK buyers and overseas investors account for a tiny proportion of buyers.

Could that change with Brexit? To understand what may happen to the market, Dickey argues that it’s important to follow what happens with corporation tax rates.

If mainland UK lowers its corporation tax rates after leaving the EU, but Northern Ireland is still beholden to EU policy, it will be poorly positioned between two low corporation tax areas. Or, as Dickey puts it, “stuck between the devil and the deep blue sea”.

But if Northern Ireland could set its tax rates, then a Brexit deal could be “lucrative and beneficial” for the property market, says Dickey.

“It could make Northern Ireland a really influential place to live,” with access to both the EU and the UK, says Dickey, and an opportune place for businesses to have their offices.

Dickey draws a parallel to the old situation of Hong Kong, sitting between China and Britain.

And in the meantime? “We have been dealing with a dysfunctional government for three years,” says Dickey, referring to the suspended Stormont assembly, “and it hasn’t stopped the property market.” But it is, nevertheless, “being artificially held back,” says Dickey, by the country’s own political uncertainty.

Now, the general election result has shaken up the situation: the DUP no longer have disproportionate influence in the UK government, as the Tories have a majority government. The DUP and Sinn Féin each lost a share of the votes, and both Boris Johnson and the Irish leader Leo Varadkar have a renewed interest in restoring the Stormont executive.

Talks began anew on Monday to break the deadlock. If they succeed, that could bode well for prices too.

How house prices, property tax and buy-to-let landlords will be boosted by Boris’s triumph

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Uncertainty has long been held up as the source of the property market’s recent ills. But with Boris Johnson securing a massive Conservative victory in the general election, there is at least now a Brexit deal on the table and a more concrete future. So what does this mean for house prices?

“Any kind of certainty is bound to help,” says Rob Walker of PwC. It will encourage “people to do things rather than just stay put,” he says.

Does this mean the value of your home is about to go up, is there about to be a property tax overhaul, and will anything get better for landlords? Or are we about to find out that certainly doesn’t actually matter that much for the market at all? Here’s our analysis of what the Tory majority means for you.

What will happen to house prices?

The Tory victory and resultant direction on Brexit will unlock “pent-up demand from people to sell,” says David Ruddock of Carter Jonas.

This is because sentiment is key, he says. The number of instructions that Carter Jonas has registered in 2019 was up on 2018 in every single month of the year except for two: February, just after Theresa May’s Brexit deal saw her suffer the biggest parliamentary defeat of any British prime minister, and November, just after the election was announced

In both months, the number of new listings fell by 16 per cent on the same period in 2018. Uncertainty makes vendors hold back, says Ruddock, even though demand is there – the volume of offers on properties in November was up 25 per cent year-on-year.

These emboldened sellers will meet “a huge build-up of demand” from buyers, he adds. The market will be liquid again, he says. That means there could be house price rises.

Is Will sorting out Brexit really boost the market?

Does certainty really count for as much as we think it does? In London, which is the epicentre of the UK’s property downturn, “there has definitely been a misconception over the last three years that the market has been affected solely and wholly by Brexit,” says James Hyman of Cluttons.

The chart below shows the annual change in prime London transactions for each month over the last year. When these numbers are mapped against political decisions relating to Brexit, it’s hard to argue that there is a consistent correlation.

On the one hand, there were sharp drops after Theresa May’s Brexit deals were rejected in January and March. But on the other, there was an even steeper fall after Boris Johnson’s deal was accepted by parliament and the election was announced – a time when the Conservative party was leading strongly in the polls and certainty seemed to be closer than before.

The Brexit flux was “the final nail in the coffin,” says Hyman. But property prices in the London market had already started to fall from the peak at the beginning of 2015 because it had hit saturation. The fundamental cause of the price drops is affordability, says Hyman, which is a three-pronged issue.

First, house prices rose at a pace that was much faster than incomes. Ahead of the recent price falls in the capital, “the market was so out of kilter with what people could pay,” says Hyman.

Secondly, the stamp duty changes introduced in 2014 increased the costs of moving for more expensive homes, which, because of the price rises, covered a disproportionately large section of the London market.

Third, lending has tightened up. In 2014, buyers could borrow seven times their income, now they can’t borrow much than four times. People in the capital – which is at the forefront of the country’s housing cycle – and the markets which are tied to it are sitting tight because they can’t afford to do otherwise.

Anyone who thinks there will be a market bounce because there is now more certainty and a greater likelihood of a Brexit deal is showing “a real naivety,” says Hyman. “People’s incomes aren’t going to double, there isn’t going to be a change to transaction costs or to lending,” says Hyman.

But if people think the market will get better, doesn’t that count for something in itself?

Sellers might be more confident, says Hyman, and they may put a property on the market if they have been holding back for a long time. But buyers still won’t have enough money to purchase them. The result could be an oversupply, which could push down prices.

The Tory pledge to introduce long-term, fixed-rate mortgages, which they say will “slash” the cost of deposits for first-time buyers, could help affordability a little. But it’s likely the policy will involve exit fees, in which case it’s difficult to imagine the uptake will be high.

There is one group which will be affected by the Tory government, says Hyman: the overseas market.

The Conservative majority will likely mean increased spending from foreign investors who have been deterred by price falls that have been fuelled by uncertainty, says Hyman. Typically, overseas buyers spend most of their money in the new-build market. This would be a boost for developers, which could have their prices underpinned, especially as housing starts have declined recently and so stock is relatively low.

How will the tax changes affect the market?

The Tories’ one concrete property tax pledge in the manifesto is an extra 3 per cent surcharge for overseas buyers. Does that mean housebuilders can say goodbye to foreign money?

Hyman says it will be of little consequence. Indeed, the tax pales in comparison to policies in other international property hotspots. Foreigners buying in Singapore, for example, pay a 20 per cent stamp duty surcharge.

But when the market is shaky, cities with large concentrations of new-build projects will be vulnerable, says Ruddock. “It will certainly depress the London market and the surrounding areas, as well as university cities such as Manchester and Birmingham,” he says.

In the short-term, however, there will likely be a surge as overseas buyers rush to get deals through before the new tax comes in, says Ruddock. A similar thing happened before the 3 per cent additional property surcharge was introduced in 2016.

What could be much more significant is if, in the Spring Budget, the Conservatives bring back their plans to overhaul stamp duty.

In the summer, Boris Johnson made a lot of noise about potentially reducing the tax. The proposals were notably absent from the Tory manifesto, but reform is certainly more of a possibility under this government than any other.

Would it spur the market? “God, yeah,” says Hyman, “if you bring down transaction costs that will stimulate the market in a very positive way.”

The impact would be felt primarily in higher-value areas such as London, where more properties have been affected by the changes introduced in 2014. And, right now, it’s not looking likely or imminent.

One thing that is now definitely off the table with the Conservative majority is the Labour and Liberal Democrat plans to tax capital gains as income, which would have meant higher charges for many homeowners and no CGT relief.

The policy would have acted as a huge disincentive to downsize and would have stagnated the market further, says Ruddock. Under this government, there’s more opportunity for movement.

Will anything get better for landlords?

“All parties are anti-second home and anti-landlords,” says Ruddock. But the Tory majority is the best outcome buy-to-let investors could have hoped for.

With this government “nothing is going to get better” for landlords, says Gavin Dick of the National Landlords Association. But, it could be worse: “what the other parties were offering was catastrophic,” he adds.

Still, he’s less than thrilled about the plans to abolish section 21, which will end ‘no-fault’ evictions. He’s also quick to dismiss the Tory pledge to enhance section 8, to strengthen landlords’ rights of possession, as insignificant.

Would the Conservative pledge to introduce transferable, lifetime tenancy deposits not help the market a little by boosting demand from renters? “It’s not a big game-changer,” says Dick, “it’s tinkering at the edges.”

As long as the phased reductions to tax relief for buy-to-let mortgages (whereby landlords are taxed on their turnover rather than the difference between rental income and mortgage interest) which began in 2017 and will reach its final phase in 2020, are set to continue, says Dick, “we will still see many landlords leaving the sector.”

Still, there won’t be as many landlords quitting the buy-to-let market as there could have been. Jeremy Corbyn had pledged to introduce rent controls and to fund renters’ unions. “If there was a Labour majority there would have been a mass exodus to Heathrow,” says Dick, “to leave the country.”

The luckiest generation: who really had it best when buying property?

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By Meadow Sam

This is the first in a series in which Telegraph Money will answer the age-old question: which generation has had it easiest with money? We’ll look at a property, investment returns, savings rate and more.

The debate over whether it is harder for today’s young people than it was for their grandparents to get on the housing ladder has raged for years.

So-called millennials and their younger “Generation Z” counterparts point to hugely overpriced houses and eye-watering deposits as proof that the barriers to buying a property today are higher than ever. Older generations, commonly known as baby boomers, argue that borrowing has never been cheaper and their mortgages had interest rates in the double figures.

The avocado has become a symbol of the housing struggle as some say that young people could save up for a deposit if they just sacrificed the costly toast spread along with frequent foreign holidays.

Data from Savills, the estate agents, compiled for Telegraph Money, has shone a light on which generation has been the luckiest when it comes to property.

We compared four generations, splitting them roughly as baby boomers (born between 1946 and 1964), Generation X (born between 1965 and 1980), millennials (born between 1981 and 1996) and Generation Z (born after 1997).

Savills looked at numerous different measures, including house prices, deposit sizes and mortgage rates, and compared the situation for someone buying in 1985, 1995, 2005 and 2015. Interestingly, the average age of a first-time buyer has not massively changed in that time at 28, 29, 31 and 30 respectively.

House prices
The amount the generations needed to pay to buy a house has grown massively since the Eighties. The boomers who were buying their first home in 1985 purchased for an average of £21,000 – or £62,505 in today’s prices.

By contrast, the average first home in 1995 was £40,000, had soared to £112,300 by 2005 and in 2015 the average first-time buyer was purchasing a property worth £156,100.

The boomers also benefited from the quickest growth in the value of their homes. Within three years the £21,000 homes had risen in value by 62pc while today’s young buyers’ homes had gained only 9pc in the three years to 2018.

Those in Generation X who bought in around 2005 were the hardest hit here – their homes actually lost 0.4pc of their value in the following three years, although this is a period that included the financial crisis.

The boomers again were the quickest to build up equity in their new homes, gaining £14,000, or 1,231pc in three years. The newest buyers have gained 51pc while those afflicted by the financial crash lost 4pc of the equity held in their homes.

Winner: baby boomers
Deposit sizes

Deposits are another area where boomers had an easier time. Not only was the average deposit paid by a first-time buyer in 1985 much lower than newer buyers at £1,100 but it also added up to just 11pc of the buyer’s salary.

By 2015, the average deposit needed was £26,600, a massive 68pc of the typical buyer’s salary. In London, this rises even higher to £81,200 or an eye-wateringly high 131pc of salary. In 1995 the average deposit needed was £2,000 (12pc of salary) and in 2005 it was £11,300 (35pc of salary).

This has been driven by an increase in the amount of a property’s value required as a deposit. This was 5pc in 1985 and 1995 but rose to 10pc in 2005 and 17pc in 2015.
Lawrence Bowles, from Savills, said: “Deposit requirements have gone up very significantly in just a few years. Incomes have been rising too, but much slower than house price growth and the size of people’s deposits has shot up much faster.”

Mortgage rates

One area where boomers do lose out is servicing the mortgage. Although getting on the ladder is much harder today, those who do manage it are faced with much lower costs to pay off their mortgage.

In 1995 the average rate on a two-year fixed mortgage, the type most likely to be taken out by a first-time buyer, was 8.07pc – more than four times the comparable rate in 2015 of 1.92pc.

What’s more, data compiled for Telegraph Money last year by Savills showed that the amount of income spent on paying mortgage interest has decreased. In the mid-Seventies, buyers spent 13pc of their salary just paying the interest on their home loan. Twenty years later, this had increased to one fifth.

Now, however, rates are far more favourable and the amount of income spent on interest has fallen to 8pc.

The terms of taking out a mortgage have also improved as buyers are now able to pool together and have both their salaries taken into account when it comes to affordability – an option that has not always been available.

Mr Bowles also pointed out that in the past it was far more common to have an interest-only mortgage where the capital was not being paid off – thus lengthening the term. In 2007, 42pc of new mortgages were on an interest-only basis whereas today that figure is around 8pc.

Winner: millennials & Generation Z
The London premium

All of these factors are exacerbated by the property market in London – and this has always been the case.
Even in 1985, average deposits were around three times higher in the capital than outside it, at £3,200.

Oddly this number fell slightly by 1995 but today it has soared to more than £80,000, still roughly three times the amount needed outside London.

As a percentage of income, this was 23pc in 1985 and 131pc today.

Mr Bowles said: “In London, prices have shot up and stayed high. We think that’s the ‘bank of mum and dad’ effect, as that’s the only real way most people can get onto the property ladder.”

And as for the avocados?

“Nobody is suggesting it’s ever been easy to buy a house,” he added, “but no amount of baked beans on toast for dinner is going to get you to the £140,000 you need to buy a house in London.”

Overall boomers

Which generation do you think had it best when buying a property?

Baby boomers (born between 1946 and 1964)
Generation X (born between 1965 and 1980)
Millennials (born between 1981 and 1996)
Generation Z(born after 1997)


Key Questions to ask When Buying Off-Plan Property

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How to spot opportunities in the UK

Understanding the changes in the marketplace is an essential component to making a good decision when investing in property in England. In many areas of the UK, it is now considered a ‘seller’s market’, which to put it simply means the amount of buyer’s exceeds the amount of the supply in available properties, therefore seller’s are able to command higher prices.

New Construction (Off Plan) Basics

Whilst demand fluctuates throughout the UK, the areas that tend to have the highest undersupply are rife with opportunities for developers and investors to benefit. Investors and home buyers are able to purchase ‘Off-Plan’ properties from the developers whilst they are under construction or even prior to construction commencing. This ensures the buyer is able to access one of the newest properties in the area, whilst securing the property at the best price.

Being an “Off-Plan” home or property buyer simply means that the person who is the buyer is purchasing a home or residence before it is constructed. Instead of buying an existing home, these new construction buyers enter into a contract of guarantee to purchase a home or unit-based off an architectural drawing or the developer’s plans for construction. This is quite common in newly built homes and neighbourhoods where a developer has been approved to create a new housing development from vacant land. This is also common for property investment buyers and individual buyers of units in a building conversion or new apartment block.

For a traditional home buyer who is learning about investing in “Off Plan” properties, the concept may seem a bit unorthodox, unnerving, and controversial. However, “Off Plan” home and unit purchases are now the norm in England, the U.K., the U.S., and other established regions around the globe. The most important detail for buyers of these types of property investments is learning how to be secured in the transaction process. That means the buyer needs to find ways to ensure that the unit or home being sold is completed within a timely manner and in the proper promised condition.

The Big Benefits to Early Unit or Home Property Investments in “Off Plan” Projects

Of all the advantages of this type of property investment, one of the biggest is the pre-construction or early construction sales price. Buyers who choose to make an early commitment to purchase a unit or home in an “Off Plan” project, usually have the benefit of getting their new home or unit at a discounted rate. These discounted sales prices are often given to individual buyers and property investment buyers that are buying a unit in a conversion project or multi-unit project at the beginning of the construction phase.

Because a builder or developer in a larger project often needs to have some commitments from buyers of their properties before the banks will extend some of the financings, they may sell the first several units at a discounted rate. This allows them to have enough buyers to substantiate more construction funding to be released by the bank. For people who choose to buy a new construction unit in the early stages, it can create a big boost in profitability.

Depending on the cost of the unit or home, some buyers of an “Off Plan” home or unit can experience a net gain in value that equals thousands of pounds compared to the selling price of units or homes being sold towards the end of a project. In most cases, the amenities and size of the units that are sold at the beginning of the project versus ones sold at the end of a project are equivalent, so the increased benefits are quite noticeable.

Whilst profitability is one of the greatest incentives for people to be an early property investment buyer in these types of projects, it is not the only benefit. Buyers who invest in the early phases of an “Off Plan” project also get the benefit of being able to choose the most pristine locations for their home or unit out of the planned development. Since the project is new, and there are few units sold, they often get the opportunity to choose the best prime location within the complex or neighbourhood for their property investment.

Understanding the Best Way to Protect Yourself with “Off Plan” Purchases

New buyers of under-construction homes or housing units and those making a property investment in an “Off Plan” property should learn as much as possible about the process they are getting involved in before they make a commitment to buy. Whilst most “Off Plan” purchases of property work out quite well, there are a few occasions where problems have occurred. Knowing how to safely protect your interests as a buyer and ensure that all goes well with the pre-built home or pre-built unit purchase is critical. A well-designed contract should ensure that the home or unit will be delivered to the buyer, as stated in the guidelines of the purchase agreement.

Buyers are always encouraged to do their research in the “Off Plan” project and check the property builder’s track record. In most cases, when a new home is being built from construction plans, a bank or financial institution is funding the construction money in increments. The financial allotments from banks on new construction projects are always remitted after the completion of a previous construction phase. The same applies to larger property projects as well. However, in a smaller single unit or private home “Off Plan” property projects, it is easier to monitor the development and construction phases.

With larger new construction projects, doing preliminary research on the builder and developer as well as getting a well-defined contract will offer the right protection and security the buyer needs.

As with any real estate property investment, it is always important for a buyer to make sure that the contract to purchase is a thorough, comprehensive contract that protects both the buyer and the seller’s legal interests. A properly created contract to purchase an “Off Plan” property should require that the final purchase and closing of the property will occur subject to the completion of the home or unit as promised and defined in the contract and architectural drawings.

When researching an “Off Plan” property project, buyers should ask these primary questions of the developer:

1) How Close to the Original Plans Does the Home or Unit Follow? This is one of the essential questions that many buyers want to know. In general, the architectural plans for a home or unit are followed as per building compliance guidelines, but developers are allowed a small % for possible size change in the unit (making it larger or smaller) if an unforeseen issue arose, meaning the designs had to be altered slightly. Government building officials will also check new developments during the construction period. Buyers will also be able to inspect their property during the build or refurbishment period.

2) Will this Property Have Less Value than Traditional Property? Traditional homes or units that are built brand new hold their value well due to less maintenance required for a good amount of time. But verifying the data for value projections, the bank value of other units sold and supply and demand at a specified location is important.

3) What Are the Biggest Benefits of This Property Investment? As with all property investments, understanding the benefits of the location, amenities, and cost savings of a newly constructed home or unit is important. What is the level of supply and demand in the area, what are the projected rental yields, and potential growth during the build period?

4) How Much Deposit Money Do I Need to Pay? The amount of a deposit can vary depending on the development, the asset class (residential/student/hotel investment, etc). In most cases, a 20-30 percent deposit is required on exchange of contracts. In addition, there will be a fee to reserve the property – this can be anywhere from £1,000 to 5-10% of the purchase price.

5) How Much Experience Does the Developer Have in New Construction Projects? This is an important question. In some cases, the builder is new to project development and should have the backing of experienced developers. Without proper experience, there can be cause for concern. Obviously, everyone needs to start somewhere but if the developer is relatively inexperienced, you need to check how your deposit funds are secured (insurance or escrow, etc).

6) How Can I ensure The Property Will Be Completed as Portrayed and With High-Quality Construction? Most builders or contractors will have an established reputation that can be verified. In addition, buyers should be able to check on their home or unit several times while it is under construction.

7) How Does the Buying Process Work? While there are always basic guidelines, laws, and protocols for purchasing any real estate, it is important to verify this with the purchase of their new home or unit. Buyers should be sure they understand the process before making a commitment of any sort.

8) How Do I Know the Property Will be Delivered as Planned? Buyers of new construction should always put proper wording into their contracts to protect them. Proper legal counsel can ensure this is done right. Additionally, all properties are inspected by local council inspectors to ensure safety and compliance are adhered to, based on architects drawings.

9) What are the Incentives of Buying Before Construction? In most cases, developers will offer price discounts and other perks to early buyers. In some cases, there are specific upgrades offered free of charge to early buyers. Buyers should ask about the variety of incentives that are offered for early buyers. It is not uncommon that developers work with buyers an negotiate a price or amenity incentive or both.

10) How Is my Investment Safeguarded? As with any type of investment, there is an element of risk. For example, the market conditions can change which could then affect your returns or value of your property. However, you can mitigate this risk by purchasing in a key location where demand will be there for the foreseeable future.

11) How Long Will the Whole Project Take? This varies from project to project and at which point during the build process you purchase. It could be anywhere from 3 months to 3 years. Anything taking longer than 3 years is likely to be a substantially large scheme and could end up being delayed as these types of schemes are usually quite complex.

12) What Happens if Occupancy is Delayed? All developments should have what’s known as a long-stop date in the contract. This is the point at which the development should absolutely be finished. The long-stop date usually factors in some delays in case they appear. Anywhere from 6 – 12 months from the original completion date. If the development isn’t completed by the long-stop date then the developer is in breach of contract and investors can choose either to remain in the development, with interest being paid on their deposited funds (deducted from their end price), or they can withdraw from the investment and will be entitled to a full refund.

13) What Items can I personalize in the Unit or Home? With new home or unit construction, there are usually a wide variety of personalized choices that can be made by a buyer. Choices in appliances, lighting, flooring, and fixtures are not uncommon. With individual homes, options in landscaping are common as well. If it is an investment property or within an apartment building, customizing your unit is likely to be limited or at the discretion of the developer but will be chargeable to the investor.

14) What Type of Final Inspection is There? Any new development will require sign-off by a local planning officer. This is a legal requirement, which then enables the new build insurance policy (10-year new property insurance) to commence. Without this sign off the building won’t receive this insurance and it won’t legally be allowed to be occupied.

In addition, investors buying with finance would usually have a surveyor go in and value the property to ensure it is in line with the agreed price.

Buyers might also wish to go in, or send in their letting agent to do what’s known as ‘snagging’. This is checking over the property from top to bottom to ensure everything is working and where it should be. Any issues would be reported back to the developer at this point who will rectify the issues.

Contracts for an “Off Plan” Property

While most developers have a standard contract for the purchase of their Property Investment units or homes, it is always advisable to use a lawyer or solicitor to act on your behalf to review the contracts and provide you with their feedback and answer any questions you have. Most developments have 1 or 2 ‘panel solicitors’ who have already carried out their contract review and search on the title to ensure the developer is legally entitled to sell the properties.

The contracts pack will consist of a sale and purchase agreement which details out the terms of the purchase along with the lease agreement.

Many buyers want to cut corners and save a few hundred pounds but it is always recommended to use a specialist lawyer, and preferably one who has already reviewed the contracts. Ask your sales agent who this is and it will save you time and money in the long run.

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