Logo for Equity Release CouncilAverage residential property has increased by 148% in value, compared to a 66%  increase in pensioners’ incomes.

House prices are now almost ten times the size of the average pensioner’s yearly income.

Housing wealth also grows faster than other sources of pensioner income over a 20 year period

 

House prices in England have grown at twice the rate of pensioner households’ disposable incomes over the past 20 years. This far exceeds the gains pensioners have seen from other staples of retirement income such as the state pension, investments, occupational pensions and other earnings, according to new research from the Equity Release Council.

Analysis of the latest data from the Office for National Statistics reveals that pensioners’ household incomes increased by 66% in real terms between over the last 20 years, from £12,664 to £21,026 a year*. Over the same period, inflation-adjusted house prices in England increased by 148% from £82,100 to £203,360**. This figure is now nearly ten times the size of a typical pensioner’s household income (9.7), up from 6.5 times pensioner income.

Table 1: Inflation-adjusted pensioner incomes and house prices, 1994/5 – 2014/5

1994/95 2014/15 Change
Average pensioner households’ disposable income £12,664 £21,026 66%
Average English house price £82,100 £203,360 148%

Fluctuations in the housing market mean that the growth in house prices, relative to pensioners’ income, has not been linear during this time. The rapid rise of house prices in the mid-2000s saw the average house price rise to an inflation-adjusted £224,313 in 2006/7. Nearly twelve times the then average pensioner income of £18,957. This is before the gap narrowed slightly in the aftermath of the financial crisis to 9.4 in 2010/11.

However, recent years have seen house prices grow faster than pensioner incomes and the gap widen again. Between 2012/13 and 2014/15 – the latest year where data is available – the average house price grew 10% from £184,080 to £203,360 (a rise of £19,280). Once adjusted for inflation while the average pensioner’s income grew 5% from £19,989 to £21,026 (an increase of £1,037).

Nigel Waterson, Chairman of the Equity Release Council, commented:

“House prices have experienced dramatic growth over the past two decades, which has given many homeowners’ equity a significant boost. Many older people have seen the value of their home increase at a far greater rate than pensioner incomes, which has game-changing implications for how people make plans to fund their retirement.

“While the growth in house prices has not been linear or universal, strong market fundamentals mean housing equity is likely to remain a sizeable asset for the foreseeable future. It means housing wealth has an indispensable part to play in all discussions homeowners have about financial wellbeing in retirement.

“Government must act to encourage people to think through their options holistically, rather than focusing exclusively on savings and overlooking other choices that could boost their prospective retirement income.”

“However, the long-term rise of house prices over this period means many pensioners who own their own homes have effectively been investing – intentionally or otherwise – in an asset that is capable of significantly boosting their finances in later life, either by helping meet one-off expenses or providing regular amounts to top up their income.

About The Equity Release Council.

The Equity Release Council is the industry body for the equity release sector. Representing over 400 members including providers, qualified financial advisers, solicitors, surveyors and other industry professionals.

It works to ensure a safe equity release market for consumers. It also operates rigorous Standards for the provision of advice and products. This guarantees the security of tenure and financial protections. 2016 marks the 25th anniversary since the first industry Standards were created for equity release in 1991. Since then, nearly 370,000 consumers have taken out an equity release plan from Council members. Drawing down almost £18bn of housing wealth.

How we can help you.

Anstee & Co are members of The Equity Release Council. To see if equity release may be an option for you, contact us today to arrange a meeting with one of our expert advisers. The first meeting with our financial adviser is free of charge. Meetings can be arranged at your home at a time convenient to you. We have offices in Kettering, Stamford and London. We also make use of meeting rooms in Bedford, Northampton, Towcester and Wellingborough. The team cover Northamptonshire, Bedfordshire and Lincolnshire.

Data sources

*Figures for pensioners’ incomes are sourced from Household disposable income and inequality data: financial year ending 2015

**Figures for average house prices taken from the Government’s House Price Index. They are adjusted for inflation using the same measure as the pensioner income data. Price used for 2014/15 figure is March 2015.

These products are lifetime mortgages or home reversion plans. Equity released from your home will be secured against it.