Impact of house price crash on charity legacy income revealed

A report is warning that income from legacy gifts to charities will fall by around 3% over the next two years due to the plummeting value of property.

This slump is set to follow double digit growth in legacy income this year.

Global financial pressures, most notably a decline in the value of homes, is set to take its toll on the value of legacies to charities, the report by consultancy Legacy Foresight is warning.

It estimates a house price slump of between 12% to 14% by 2024, after decades of substantial growth. This is set to trigger a 3% fall in the value of bequests.

“However, given the extremely volatile nature of the economic crisis, there is a risk that house prices could reduce further if the recession is deeper and more protracted than currently expected,” it warned.

Figures released last month by property website revealed that asking prices for homes fell in six out of nine regions in England as well as in Scotland and Wales. The monthly change across England and Wales was -0.2%.

Legacy Foresight added that legacy income from the sale of homes should improve after 2024, when the housing market is “expected to return to growth and the average values are expected to follow”.

It anticipates legacy income to be worth £4.4bn to charities by 2027.

“The turbulence of the last twelve months with the war in Ukraine, cost of living crisis and rising inflation has caused many charities to be concerned about the future of income,” said Legacy Foresight economist Jon Franklin.

“Although in the near term we are more cautious about the outlook for legacy income over the next five years, we expect negative impacts to be short lived, and to see a return to growth after 2024, driven by rising bequest numbers and a steadying of the housing market.”

Record income in 2022

The warning around the value of legacies over the next two years comes as Legacy Foresight predicts that this year income from gifts in wills for charities will reach a record £4bn by the end of 2022.

This is 14% up on the previous year despite the cost-of-living crisis hitting the value of donations and gifts.

Considering inflation, legacy income is up by 2.6% over the year, which is a doubling in the real value of gifts in wills to charities over the last 30 years.

“Legacy incomes fluctuate in line with the economy – during periods of growth we tend to see legacy incomes rising rapidly and when the economy struggles, legacy income growth tends to slow,” added the consultancy.

“However, despite having faced recessions, global financial crises, house price crashes and years of government austerity, legacy income has proven relatively resilient – income has fallen in just six years out of the last 30 years."

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