LONDON, May 9, 2017. Felicity Young, +44 (0)20 7087 5108
Latest JLL Residential Research shows the Bank of Mum & Dad in London and South Eastern England is worth an estimated £103 billion and could assist in the purchase of more than £1 trillion worth of homes in the UK.
In conjunction with YouGov, JLL has undertaken an in-depth study looking at the impact that the Bank of Mum & Dad and inheritance will have on the UK housing market.
As well as quantifying the average pot from the Bank of Mum & Dad and the expected inheritance, we also asked the public about their views on housing affordability and the role of the Bank of Mum & Dad.
Quantifying the numbers
• The Bank of Mum & Dad in London and South Eastern England is worth an estimated £103 Billion
• It could assist in the purchase of more than £1 Trillion worth of homes in the UK
• Between a quarter and half of all home purchases in London and South Eastern England could be assisted by the Bank of Mum & Dad
• The average hand out per child in London and South Eastern England is £24,800
• The average Bank of Mum & Dad pot is £55,300
• 70% of parents say all monies passed down will be pure gift
• 26% of parents will use inheritance passed down to them to help their children onto the housing ladder
Commenting on these figures Neil Chegwidden, Director, Residential Research at JLL says: “We all know that the Bank of Mum & Dad has helped many beneficiaries onto the housing ladder but the numbers revealed in this research are astounding. The Bank of Mum & Dad in London and South Eastern England alone amounts to more than £100bn. If this money is used as a 10% deposit it could help fund more than £1tn of home purchases. The impact for the London and South Eastern England housing markets is clearly huge. At the very least it will provide a crutch for house prices in these regions, but it is more likely to lead to further upward pressure on prices.
The worrying social element is that the Bank of Mum & Dad phenomenon is set to extend the gap between the ‘haves’ and the ‘have-nots’. With Bank of Mum & Dad support likely to push house prices even higher when affordability is already stretched it means that the Bank of Mum & Dad will become even more important for the privileged parts of society, but inevitably leaving other households further behind.”
• 77% of people think it is disgraceful that housing has become so unaffordable, especially for young adults
• 76% believe it will be even more difficult for young adults to be able to buy a home in 20 years’ time
• 66% believe that UK homes being increasingly owned by a privileged few will become a social problem for the UK
• 36% believe parents should consider all manner of ways to help their children buy a home
• 14% think parents should downsize their home and pass on part of the proceeds to help their children buy a home
• 12% think parents should be more thrifty with their spending so that their children are better able to buy a home
Neil Chegwidden adds: “People in London and the South East are worried about the high price of housing. More than three-quarters of people we surveyed went even further and agreed that it was disgraceful that housing in this country has become so unaffordable. More concerning is that the vast majority also believe the problem will deepen over the next 20 years.
Two-thirds of people believe the escalating trend towards home ownership being restricted to a privileged few will become social problem. People are clearly concerned that the huge sums of money involved, both in terms of Bank of Mum & Dad funds and inheritance hand-downs, are set to widen the affordability gap.”
• £1.77tn could be passed down in inheritance from families in London and the South East
• At least 5.2m households in London and the South East are preparing to pass on some inheritance
• The average inheritance pot is £318,000 which includes a broad range of households from non-homeowners to the super-rich
• Only 65% of inheritance funds will go directly to children with grandchildren and other family members
Commenting on the inheritance numbers, Chegwidden says: “These huge inheritance sums are likely to have a massive impact on the UK housing market. A significant proportion of this accumulated wealth, in large part created by the strong uplift in house prices over the last 30-40 years, will undoubtedly be utilised to buy homes in the future and will therefore provide support for house prices and transaction levels for some time to come, especially in London and South Eastern England.
However, the social implication is that inheritance, particularly given the recent increase in the tax free allowance including a family home will increase to £1/2m per person from 2020, will maintain, but probably amplify the gulf between the ‘haves’ and ‘have-nots’. If we combine the inheritance and Bank of Mum & Dad factors together, the chasm between the ‘haves’ and ‘have-nots’ will grow ever-larger.
Interestingly, the passing down of inheritance will also pose questions for beneficiaries. For example, we know from our analysis of the Bank of Mum & Dad research that significant sums of the money given to children from the Bank of Mum & Dad originated from inheritance passed down to them. So new inheritance beneficiaries have the dilemma about whether they use all the inheritance for themselves and their own home aspirations or use it to help their children.”
Looking at the overall findings, Neil Chegwidden concludes: “The huge sums identified will play a significant role in the housing market over the short to medium term in London and South Eastern England, providing welcome support to transactions and house prices.”
Download the full report and listen to Neil’s podcast.