The UK housing market is approaching a tipping point, with a rapidly ageing population exacerbating a chronic mismatch between housing supply and demand, according to a new report published by fintech firm Lenvi.

Titled The Generation Gap, the report highlights the scale of the demographic shift: by 2050, one in four people in the UK will be over the age of 65, up from one in five today.

This generational change is contributing to a growing number of under-occupied homes and placing further pressure on younger buyers struggling to get onto the property ladder.

Lenvi, which provides lending technology and services to over 150 financial institutions, warns that without intervention, the UK’s already stretched housing market risks becoming even more gridlocked.

By 2040, there will be an estimated 12.8 million surplus bedrooms in homes across the country – nearly two-thirds of them in properties owned by people over 65. At the same time, more than three million older homeowners say they would like to downsize but feel unable to do so, due to a lack of suitable housing options and disincentives such as stamp duty.

The resulting stagnation in housing mobility is limiting the availability of family-sized homes and compounding affordability challenges.

“Simply building more homes isn’t the answer,” said Richard Carter, chief executive of Lenvi. “We need more of the right types of homes – including affordable housing and appropriate retirement living – to unlock supply and improve affordability across the market.”

The report notes that retirement living accounts for just 3% of the UK’s housing stock, a figure that lags behind many international comparators. Combined with a backlog of 4.3 million “missing homes” and house prices that now average 8.3 times annual earnings – compared to 3.5 times in the early 1990s – the picture is one of a market that has become increasingly unbalanced.

Carter said: “By aligning new housing supply with actual household needs – supporting both older and younger generations in finding homes that match their circumstances – the UK can begin to unlock the full potential of its housing market and ensure that it works for everyone, at every stage of the homeownership lifecycle.

“The recommendations we make in this report toward solving the mobility and supply issues in the market certainly aren’t the only ones – but our hope is that the report provides a springboard to continue the conversation.”

BETTER PRODUCTS & MORE INCENTIVES

Among the recommendations explored in the report are proposals for financial products and government incentives designed to support downsizing and housing mobility. These include removing stamp duty for so-called “last-time buyers” and enhancing the role of building societies in addressing regional supply constraints.

The report also argues that lenders themselves have an important role to play in facilitating change. By embracing product innovation and considering how both their offerings and their relationships with customers can support access to more suitable housing, financial institutions could unlock significant opportunities in an otherwise constrained market.

While the ageing population presents a complex challenge for housing policy, Lenvi concludes that it also represents an opportunity for the lending sector to help reshape the market for the better – and ensure that homeownership remains within reach for generations to come.