Halifax Financial Services (HFS)has estimated that over £360bn in today’s money of housing assets will pass from one generation to another over the next 15 years.

Additionally, the value of housing assets left in wills every year may have more than doubled from £14bn in 2002/3 to £32bn in today’s money by 2020.

HFS calculated that 60% (£32bn) of the total value of all estates (£54bn) in 2019/20 will be accounted for by housing. Additionally, the number of estates with property assets is expected to increase from (104,950) or 59% of the total in 2002/3 to (115,347) or 65% in 2019/20.

Baby Boomers
The transfer of housing wealth over the coming 15 years would be the largest of its kind ever recorded in the UK, with baby-boomers (born in 1946) playing an important part in this inter-generational transfer of housing wealth, HFS said.

More baby boomers (78%) own their own home than any other UK age group. Additionally, baby boomers have witnessed an extraordinary transformation in British society: the rise of owner occupancy. When they were born in 1946, an estimated 31% of households owned their own homes. By 2001, this number had more than doubled to 70%.

The creation of a property owning society has significant implications for the role of housing as a source of inherited wealth. Housing accounted for 49% of the total value of all estates in 2002/3 up from 36% in 1997/8, according to the Inland Revenue. HFS estimates that this trend will now accelerate as baby boomers retire and pass away.

Uneven ground - the regional impact
However, the impact of transferring housing wealth will not be spread evenly across the country. HFS calculates that the South of England will account for 54% (£17bn) of the total value of residential housing by 2019/20.

Most other regions will have modest shares. Wales is expected to have the lowest share (4% or £1bn); the North West (10% or £3bn) will have the highest share of all the non-Southern regions.

The South of England’s share of inherited housing wealth is higher than its share of economic output. The South accounts for 51% of the economy’s Gross Value Added in 2004 against 54% of likely housing inheritance.

HFS did add that there are a number of factors which may reduce the level of inheritances:

Average Price of Inherited Properties: the average price may be lower than the average price assumed since these homes may have been less well maintained.

Equity Extraction: increasing numbers of older homeowners may release some of the wealth locked up in their properties prior to death.

Inheritance Tax: the failure of successive governments to raise the IHT threshold in line with house price inflation has made increasing numbers of homeowners potentially liable to IHT. This may encourage more people to extract equity from their home prior to death.

Residential care: a sizeable number of elderly people may need to sell their properties in order to finance staying in residential care, reducing the number of housing inheritances.

Ray Milne, Managing Director of Halifax Financial Services, commented: “The amount of housing wealth inherited is expected to double in 15 years reflecting demographic changes and the passing away of the first mass generation of homeowners.

Housing wealth will undoubtedly assist the next generation to provide for their pension. But it does not, by any means, reduce the need to save for the future including making provision for retirement.”