Shifting Sands: The Growing Role of Property in Retirement Wealth
New research by Aviva has looked at the attitude to spending, saving and retirement in the over-45s. Including the length of time homeowners are staying in one property before moving on, showing the growing role of property in retirement wealth. There has been a reduction in levels of property ownership compared to the figures from six years ago. In both those with mortgages and those who own their properties outright. Currently, 16% of 45-54 year olds own their property mortgage-free, down from 23% in 2016. For the next age group up, those aged 55-64, only 45% own their property mortgage-free, compared to 48% in 2016. Suggesting that mortgages are currently being paid off later in life than previously. The next age group up, those aged 65-74, still had some homeowners with a mortgage. Currently the figure stands at 13%, with 9% back in 2016.
Time living in one property
The amount of time people are spending in their property before moving house has stayed fairly level. The current level is 20 years, down slightly from 21 years in 2016. Currently those who have spent 20 years in their home would have bought in or around 2002. At the time average house prices were £101,000. Their properties are now worth considerably more. Those who are mortgage-free have lived in their properties for 22 years, compared to those who have a mortgage, who have been there for 16 years. This means that those who don’t have a mortgage have seen an extra six years of increase in equity in their home.
House price increases
House prices have soared. Since 2016, average home values for older homeowners have jumped 8% to £287,000. Those aged 75+ own homes worth £310,000 on average, a fivefold increase since their 1994 purchase. People aged 65-74 have seen their homes appreciate from £66,231 in 1998 to £302,000 today. This substantial wealth tied up in property far exceeds savings and investments. After mortgage deductions, average home equity stands at nearly £195,000, compared to just £52,000 in savings.
It is important that all assets are taken into account when planning for the future. Matt McGill, MD at Aviva Equity Release, said: ‘In the years since we last carried out this research, significant events have impacted the way people feel about the economy, their futures and their retirement plans. Understandably, a much larger number of people are now citing worries about the economy as their major concern in retirement.’ ‘Despite all this, the housing market in the UK has been on a steady upward trend since many current retirees bought the home they still live in. But less than half (42%) of the people we surveyed said that their home was worth more than their savings and investments. Yet the facts show that people’s property equity is worth almost 4 times as much as their savings. It’s likely that people have accumulated more wealth in their property assets than they realise, and looking at ways of utilising this in planning for retirement could have a significant impact for them. It’s an important factor to consider when looking to plan for a comfortable retirement.’
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