When saving for retirement, many are torn between investing in property or using a pension to raise funds after they finish their working life. While both have different advantages, new data provided by Key, the retirement planning service provider, has suggested that property almost always remains the better option for raising retirement funds.
New analysis provided by the independent advisory firm has shown that retired homeowners who are mortgage free have seen their home values increase by around £1,000 each month during the last six months. This is despite much uncertainty in the housing market.
The total property wealth of those aged over 65, who are also mortgage free, is at a record high, reaching a total of £1.118 trillion in the UK. Across Britain, the average gain in property wealth for those aged over 65 is approximately £5,998 each, with every region of the country benefiting from an increase in property values during the last six months.
Homeowners located in Yorkshire and Humberside have experienced the largest increases, at £8,607 on average. This is closely followed by homeowners living in Wales and the North West, who saw increases of £7,875 and £7,546 respectively. This is far more than the national average, which is currently £5,889.
Mortgage free and retired homeowners in London experienced the smallest increase in value, at £1,655. This was only just matched by the same amount that those aged over 65 can expect in Yorkshire and Humberside in a single month, at £1,435.
Key first analysed the wealth of the mortgage free over 65s in 2010, and there has since been an increase in the property wealth of retired homeowners of almost £340bn. This is the equivalent of a 43 per cent increase.
Key’s CEO, Will Hale, explained that retired homeowners across the UK who had paid off their mortgages had made almost £1,000 on average from property each month, with some experiencing even larger gains. He explained that while these trends are interesting, what is clear is that no matter what influences house prices year on year, house values for the mortgage free over 65s continue to rise. This property wealth can transform people’s standard of living after retirement, and gives them the opportunity to help family members.
Equity release customers are increasingly able to give substantial gifts of money to family members, such as grandchildren, with money used for weddings, house deposits, university fees and clearing debts. Many customers also choose to use their money to prepare their homes for old age, while preserving a large portion of wealth for their family.
Although equity release is not the right option for all, it is obvious that property is becoming the largest asset in retirement.
Other regions which fared well for increases in property value included the East Midlands and West Midlands, increasing by £7,527 and £7,376 respectively, on average during the past six months. The South West and South East, on average, saw property values increase by £6,328 and £6,103 respectively during the past six months.
Narrowly faring better than London was East Anglia, which on average, saw property prices rise by £3,133 over the past six months.
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