Equity release provider Key Retirement has released data showing retired home owners have “earned” £1,700 from their houses in the past three months, taking total property wealth owned by retirees to a record high of £1.072trn in February.
The firm, which has an interest in many of these home owners cashing in their wealth using equity release plans, says this shows the long-term “success” story of property investment in the UK.
But agents are questioning whether this should be celebrated while first-time buyers struggle to get on the property ladder.
Many estate agents had hoped the issue of home ownership among the older generation would be tackled in the Housing White Paper, with many seeing the lack of options for older buyers as a stumbling block to free up the chain below.
Paul Smith, chief executive of haart, said at the time: “It is crucial that we see greater government incentives for housebuilders to build the right type of housing, and for older people to downsize their family homes. Only then will we see the level of fluidity in the market needed to combat a growing population and a lack of supply.”
Russell Quirk, chief executive of eMoov, claims celebrating these figures highlights a severe dysfunctionality within the UK property market and is a key contribution to the current housing crisis.
He said: “This is by no means an attack on previous generations and anyone who has worked hard enough to earn their own piece of our pleasant land, regardless of what they paid at the time, should be commended for doing so not ridiculed.
“Most of us rely on our property investment for retirement and to leave a legacy to our children, but now it has reached a point where inheritance is the only viable method for the majority to get on the ladder and many are holding out to maximise the amount they can make on their property.
“As a result, whilst they remain in large family houses years after their children have fled the nest, young families elsewhere are unable to get on the ladder due to a severe shortage of stock. This is undoubtedly a contributing factor behind today’s housing crisis and should be addressed and rectified, not celebrated as these latest figures seem to do.”
But James Greenwood of Stacks Property Search says the crisis is more about housing stock and less about price and wealth.
He said: “The main problem with housing in the UK is that people are living in the wrong house. There are 750,000 empty houses in the UK, and if these were combined with the spare accommodation enjoyed particularly by the empty nest generation, there would be a significant increase in availability.
“Changes in inheritance tax rules mean that grandparents will continue to live in houses that are too big for them because it makes sense financially when many would prefer to downsize and release capital to put a roof over their children’s heads. Perhaps this could be offset by a spare bedroom levy?
“The cost of moving has become so high in terms of fees and taxes that the turnover of property has slowed dramatically. And the buy to let market has grown because the older generation choose to invest in property rather than pensions and other financial instruments sold by a financial services industry that’s regarded with some suspicion.
“Generation rent isn’t necessarily a bad thing. Buying a property costs around 6% to 8% of equity in terms of fees and this goes some way to justifying rent paid in the short term for a more mobile generation.”