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2016 Bungalow Anomaly At Its Lowest Ever?

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So Ive recently noticed, bungalows in the North West, arent selling like they used to. (I know, is anything?! Bear with me) Larger properties in des locations still do well, but the run of the mill, 2 bed downsize options, just arent turning over. So looking a little further, I came across this from the express re stamp duty.

http://www.express.co.uk/news/uk/660091/Pensioners-downsize-house-home-smaller-stamp-duty-exempt

I think this indeed has a bigger impact on the average joe bloggs than has been anticipated, and bucks the forecast that the lack of bungalow building and availability will bring a higher premium/anomaly for the 'desirable' downsize bungalow.

The one thing, end of chain downsizers are buying, is their forever home. Where as, at other stages in a housing chain, if you have a few reservations or compromises on a property, quite often you proceed to buy as indeed the property will follow the housing market and the lifecycle of selling to move on is just part of the options available. Irrespective of market movement, anyone buying then selling, will retain the 'value', whatever that is in a comparable market. Retiring downsizers dont have those options, the buffer as it were regards compromises, isnt there if there is never an intention to sell, so the pressure to find the 'right' home is far higher.

My point being, that in removing the flexibility to buy that forever home in advance of selling the large and loved family home, by hitting them with the 2nd home stamp duty surcharge, current downsizers appear to have decreased to a trickle, as theyre not prepared to take the risk, that their forever home is out there once they finally sell. So, 3 questions for you;

1/ Is any one else noticing 2 bed bungalows arent turning over as they used to? Is it a regional thing only?

2/ When forecasts have consistantly said, bungalow building has dramatically dropped in the last 30 years, to a point where some say, no bungalows will be built at all by 2020, causing an anticipated massive undersupply in the future, are we currently seeing the bungalow 'premium'/anomoly at its lowest ever point in history?

3/ How big an impact do you think downsizers not downsizing has on the chain? Is it negligible, i.e. it simply takes a chunk out of the prospective buyers market for 2 bed properties, or is it significant to the point that we may see a change in stamp duty rules re a retirement purchase?

Just something for a sunny tuesday to mull over :)

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1/ Is any one else noticing 2 bed bungalows arent turning over as they used to? Is it a regional thing only?

Many two bed bungalows round my way are being converted to 3 or 4 beds.

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My point being, that in removing the flexibility to buy that forever home in advance of selling the large and loved family home, by hitting them with the 2nd home stamp duty surcharge, current downsizers appear to have decreased to a trickle, as theyre not prepared to take the risk, that their forever home is out there once they finally sell. So, 3 questions for you;

1/ Is any one else noticing 2 bed bungalows arent turning over as they used to? Is it a regional thing only?

2/ When forecasts have consistantly said, bungalow building has dramatically dropped in the last 30 years, to a point where some say, no bungalows will be built at all by 2020, causing an anticipated massive undersupply in the future, are we currently seeing the bungalow 'premium'/anomoly at its lowest ever point in history?

3/ How big an impact do you think downsizers not downsizing has on the chain? Is it negligible, i.e. it simply takes a chunk out of the prospective buyers market for 2 bed properties, or is it significant to the point that we may see a change in stamp duty rules re a retirement purchase?

Just something for a sunny tuesday to mull over :)

They can still buy a 2nd home (the bungalow in this case) and claim the SDLT back once the family home sells.

I think the answer is much simpler and much more obvious if you spend time trawling RM with PB installed and looking at the decor of the properties for sale -

That downsizers need to sell the family home to fund the purchase, they simply don't have the cash for an outright purchase of a downsizer home. If they did have the cash they would have been doing so, and you'd be seeing more motivated sellers of family homes. The SDLT change hasn't been around long enough to have had a notable effect.

Leading to:

They aren't "giving them away"! Just look at the kite fliers, the 3years on the market with no price drops, the decor in many screams old... ornaments, doilies and mobility aids all round!

Thus the whole process stops, until they move out in a box and the kids aren't "giving it away"!

Edited by My Name Is ??

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I don't understand why the 2nd home surcharge would come into this at all, if they are just selling up and buying somewhere smaller?

That Express article seems to be arguing that they shouldn't have to pay any stamp duty at all. WTF not? The vast majority of down-sizers are sitting on 100's of thousands of unearned wealth and probably paid a pittance in stamp duty when they first bought. Cheeky even to suggest it, IMO - although these are boomers we are talking about, so no doubt they feel that they somehow deserve an exemption.

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Many two bed bungalows round my way are being converted to 3 or 4 beds.

Yep, Ive seen that too, but as the squeeze gets tighter and retirees earning capacity flies out the window, the whole downsize thing is to indeed dramatically cut overheads and release equity.

Whilst it may seem logical, converting bungalows into bigger property simply to make more on a resale (property developers still at it!), it strikes me that by doing that, there may be an even bigger decreasing circle of 2 bedders available. How many "downsizers" move from a £250k family home to a £200k bungalow? If thats all there is in it, Id guess they stay put. Yes a £200k bungalow is going to significantly appeal to retirees selling a £500k home, but youd also have to look at location too. Buying at that price, surely market towns and seaside areas start to get in on the nice to have list?

Im just looking at the average retirees, maybe end of life salary was around the £40/50k mark, lives semi urban, and just had their pension age increased. Just throwing numbers around using my £250k example, but Id imagine that to downsize, the boxes youd need to tick are, significant reduction in monthly overheads (heating, council tax etc) and release a decent £100k say (its all relative) to enjoy for a while, get a decent car and have a buffer to pay your ongoing bills.....for life! I think its the modest 2 bedder that may see the biggest demand. I also never got the point of attic converting a bungalow! Something like 11million people have a limiting disability in the UK, add to that the ageing population, the big pull of a bungalow is single storey living.

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I don't understand why the 2nd home surcharge would come into this at all, if they are just selling up and buying somewhere smaller?

That Express article seems to be arguing that they shouldn't have to pay any stamp duty at all. WTF not? The vast majority of down-sizers are sitting on 100's of thousands of unearned wealth and probably paid a pittance in stamp duty when they first bought. Cheeky even to suggest it, IMO - although these are boomers we are talking about, so no doubt they feel that they somehow deserve an exemption.

No, its the surcharge on the 2nd home scenario. Yes you would be right, if they were just selling and buying, but due to the amount of equity in 'family' homes, its been relatively simple previously to buy the forever home first (remortgage on main residence) when you find one that you really want, then sell the main home after that. Under the new stamp duty rules, a 3% surcharge is paid on a 2nd home purchase. Yes you can then claim it back as long as you sell your main home within 12 months. The panic sets in if you dont manage to get a seller for your extortionately overpriced family home. Also, no theyre not asking for a complete removal of stamp duty on retiring purchases, just the 2nd home scenario as described.

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They can still buy a 2nd home (the bungalow in this case) and claim the SDLT back once the family home sells.

I think the answer is much simpler and much more obvious if you spend time trawling RM with PB installed and looking at the decor of the properties for sale -

That downsizers need to sell the family home to fund the purchase, they simply don't have the cash for an outright purchase of a downsizer home. If they did have the cash they would have been doing so, and you'd be seeing more motivated sellers of family homes. The SDLT change hasn't been around long enough to have had a notable effect.

Leading to:

They aren't "giving them away"! Just look at the kite fliers, the 3years on the market with no price drops, the decor in many screams old... ornaments, doilies and mobility aids all round!

Thus the whole process stops, until they move out in a box and the kids aren't "giving it away"!

Agree with most, yes decor and maintenance on bungalows have historically been shocking simply due to the demographic living in them. Yes, families do hold out for 'best price', and possibly go to rental if not achieved, but I wonder if this will be squeezed just as the main BTL market is being squeezed too. One thing I disagree on is ability to buy. Remortgaging to buy retirement or holiday homes is nothing new, and is easy enough at 60 if theres enough equity in your main home. Its been the obvious choice for years with hundreds of thousands tied up in equity, but as costs to do that, and added stamp duty increase, (theres a risk you dont sell in the 12 months) Im merely speculating that in asking for a stamp duty exemption, it is indeed having an impact?

Today, imminent retirees are still comfortable. Low interest rates on low mortgages, monthly salary still coming in, but what will the world look like in 5 years? Pension annuities are now non existant, are they also the vast majority of 'accidental landlords' currently coming under the cosh? The one area of BTL that will have no buffer, is the retired BTL landlord. A large maintenance bill, tax bill, or significant rise in BTL interest rates and retirees have no monthly disposable income to cover it.

Anyway, I digress, but what will the impact of next to no bungalow building be in the next few years? A non existant problem? Or a surge for emergency cheap housing of the elderly?

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Many two bed bungalows round my way are being converted to 3 or 4 beds.

Ditto. Anecdotally I would say most of them are being "remodelled" from 2-3 or even 4 beds to raise the roofline to add 2-3 additional beds & being subsequently sold/rented to younger familes.

Again anecdotally this appears to be resulting in a bungalow premium (development target & supply shortage for boomer/elderly downsizers/empty nesters). Ones Ive kept an eye on locally recently have all sold for a premium over asking. Im aware from discussing with boomer friends etc bungalows in good locations on decent plots are highly sought after as bungalows for occupation, not for redevelopment/profit. My finger in air judgment is supply is rapidly diminishing around here due to redevelopment/zero new build bungas.

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No, its the surcharge on the 2nd home scenario. Yes you would be right, if they were just selling and buying, but due to the amount of equity in 'family' homes, its been relatively simple previously to buy the forever home first (remortgage on main residence) when you find one that you really want, then sell the main home after that. Under the new stamp duty rules, a 3% surcharge is paid on a 2nd home purchase. Yes you can then claim it back as long as you sell your main home within 12 months. The panic sets in if you dont manage to get a seller for your extortionately overpriced family home. Also, no theyre not asking for a complete removal of stamp duty on retiring purchases, just the 2nd home scenario as described.

Well that's not what the article is talking about - they are describing a normal stamp duty scenario and arguing they should be exempt for doing the favour of releasing their family home into the market - although fortunately this idea doesn't appear to have gained any traction.

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Well that's not what the article is talking about - they are describing a normal stamp duty scenario and arguing they should be exempt for doing the favour of releasing their family home into the market - although fortunately this idea doesn't appear to have gained any traction.

Mattyboy, youre right!! My apologies all round ....doh!! Ive been surfing around so havent a clue where this small seed for this topic came from !

Reading my own link properly now.....omg, how on earth can you justify giving a further tax break to those who are already sitting on the hundreds and thousands of equity causing the over heating market in the first place! Surely theyre the first people who can afford it?! (This is now a completely different topic to the one I intended.... so will leave it there......thank you for pulling me up on it).

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Mattyboy, youre right!! My apologies all round ....doh!! Ive been surfing around so havent a clue where this small seed for this topic came from !

Reading my own link properly now.....omg, how on earth can you justify giving a further tax break to those who are already sitting on the hundreds and thousands of equity causing the over heating market in the first place! Surely theyre the first people who can afford it?! (This is now a completely different topic to the one I intended.... so will leave it there......thank you for pulling me up on it).

Indeed - that they even have the temerity to suggest such a thing (almost) beggars belief. And they call the millenials an entitled generation?

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Well that's not what the article is talking about - they are describing a normal stamp duty scenario and arguing they should be exempt for doing the favour of releasing their family home into the market - although fortunately this idea doesn't appear to have gained any traction.

Because it's complete chronic entitlement - beyond all belief.

Know one elderly guy who sold for £300,000 a few years ago. He bought it for something like £5K originally. The buyers had help from mother, who moved in with the couple.

12 months before that, the owner had bought nice pad by the coast for cash.

So a life of HPI. Wages to spend on his family, not servicing a mortgage, which was paid down within a few years. Enough to buy again, without selling original home, until he got 'what it was worth'. And all the special pleadings for older owners to be except stamp duty in order to move their mad-gainz?

Thankfully didn't happen. Say hello to 3% stamp duty hike to make buying (to downsize) before selling (holding out for what it is worth) that bit less likely.

A few years ago I did caution a young couple from extending a 2-bed bungalow on an estate of bungalows. That was in North West / Lancs, where prices that much cheaper. They had plans to spend some major money on it, making it a family home, with more bedrooms. My view was if and when they wanted to sell in the future, they may get less interest, because fewer older people, on the downsize, need 4 bedrooms. Not going to get the premium for it, vs all the other 2 bed bungalows. That might change if older owners do refuse to downsize, and more bungalows go at better value to younger people. Although it's not a great solution is it.

I'm warm on bungalows myself (but prices here mostly stupid... £300K-£650K+). If there is a bit of a slump in downsizers, holding out for what it is worth.. and those who previously may have bought before selling main home - now can't buy first without paying higher stamp duty (already own one home), might be a window of opportunity to get some value. Such as from an inheritor looking for quick sale.

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All properties are struggling at the moment and turnover is low. When I sold last quarter 8 out of 10 detached bungalows were sold in the area including mine, that has since reduced to 2 sold from 11 post the BTL deadline.

The reason bungalows appeal is not so much the house, but the land...grounds on the older ones to keep it relatively private and often standing well back on the plot.

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