The number of people planning to take money out of their house to supplement
their pension has increased dramatically, according to a study from YouGov
and investment adviser, Old Mutual Wealth.
The study showed that 11pc of those approaching retirement plan to buy
a second home to rent out, compared to the 6pc of pensioners who
currently rely on this form of income.
Annuity reforms which come into effect in April, allowing baby-boomers to withdraw their pension in one lump cash sum, are expected to fuel a wave of purchases of one and two bedroom flats to rent.
Annuity reforms which come into effect in April, allowing baby-boomers to withdraw their pension in one lump cash sum, are expected to fuel a wave of purchases of one and two bedroom flats to rent.
This surge, combined with the UK’s chronic housing shortage, particularly in
Greater London and the South East, will drive up prices for those not yet on the ownership ladder.
Analysis from the property group, Savills, has identified approximately £3
trillion of net housing wealth tied up in owner-occupiers’ homes, much of
which is held by older households who have paid down the bulk of their
mortgage debt and seen significant house price growth.
“Pre-retirees face much more pressure to use some of that latent wealth, given pressures on pensions and an increasing need to help their children get on or move up the housing ladder. That means they are much more likely to consider downsizing, either reinvesting the sums released into rental property or passing it down a generation,” said Lucian Cook, head of residential research at Savills.
The YouGov data also found that 15pc of those preparing to retire are planning to downsize from their main home, compared to 2pc of the current pool of pensioners. If a proportion of these move into retirement villages, it will free up more family homes and curb price growth for those moving into their second or third house.
“This [pensioners downsizing] is likely to free up some family housing while also increasing demand for smaller properties, offsetting some of the constraints on transaction levels that result from mortgage regulation and potentially narrowing some of the gap in pricing on different rungs of the ladder,” said Mr Cook.
However, those approaching retirement could have an unhealthy over-reliance on property, warned Adrian Walker, a director at Old Mutual Wealth.
“For many people, their home is the place where they brought up their children and can have a strong emotional attachment. Giving that up can be a struggle and people have historically preferred to hold on to the family home and pass it on to their children,” he said.
“But attitudes are changing. More people understand that they may need to use value tied up in property in order to help fund retirement.”
A Labour win in May’s general election could also upset retirement plans. The introduction of rent controls, a policy advocated by the Labour leader, Ed Miliband, could deter reputable landlords and drive up rents for tenants, experts have warned.
http://www.telegraph.co.uk/finance/property/11399655/Pensioner-landlords-could-drive-up-house-prices-for-first-time-buyers.html“Pre-retirees face much more pressure to use some of that latent wealth, given pressures on pensions and an increasing need to help their children get on or move up the housing ladder. That means they are much more likely to consider downsizing, either reinvesting the sums released into rental property or passing it down a generation,” said Lucian Cook, head of residential research at Savills.
The YouGov data also found that 15pc of those preparing to retire are planning to downsize from their main home, compared to 2pc of the current pool of pensioners. If a proportion of these move into retirement villages, it will free up more family homes and curb price growth for those moving into their second or third house.
“This [pensioners downsizing] is likely to free up some family housing while also increasing demand for smaller properties, offsetting some of the constraints on transaction levels that result from mortgage regulation and potentially narrowing some of the gap in pricing on different rungs of the ladder,” said Mr Cook.
However, those approaching retirement could have an unhealthy over-reliance on property, warned Adrian Walker, a director at Old Mutual Wealth.
“For many people, their home is the place where they brought up their children and can have a strong emotional attachment. Giving that up can be a struggle and people have historically preferred to hold on to the family home and pass it on to their children,” he said.
“But attitudes are changing. More people understand that they may need to use value tied up in property in order to help fund retirement.”
A Labour win in May’s general election could also upset retirement plans. The introduction of rent controls, a policy advocated by the Labour leader, Ed Miliband, could deter reputable landlords and drive up rents for tenants, experts have warned.
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