Growing wealth held in property

Importance of the role of property wealth in retirement planning 

Property wealth can play an important role in a retirement strategy, providing a source of income and capital growth, and this has been highlighted in new research which has revealed the increasing importance of the role of property wealth in retirement planning[1].

The research looked into levels of spending, saving and attitudes towards funding retirement in the over-45s, and follows a similar survey run in 2016[2]. The study also looked at property, and whether the thriving market has affected people’s attitudes towards their property wealth, as well as whether there has been more mobility driven by the ability to capitalise on increasing property wealth.

Compared with six years ago, there has been a decrease in property ownership, either outright or with a mortgage, particularly in the younger age groups in this sample. In 2016, nearly a quarter (23%) of 45-54-year-olds owned their property outright, and that has fallen to 16% in 2022. For 55-64-year-olds, the respective numbers were 48% and 45%.

Property asset values

Overall, this indicates that mortgages are being paid off later than they were six years ago. As people get older, more own outright – in 2016, 13% of 65-74-year-olds owned with a mortgage, compared with 9% in this age group this year.

Length of tenure in the same property has remained more or less constant over the last six years, at just under 20 years, compared with 21 years in 2016. In 2002, when people bought their house, the average house price in the UK was £101,000, so this age group have seen a significant increase in the value of their property assets.

Housing market boom

Those who own outright have typically been in their property longer – 22 years, compared with 16 years for people who own with a mortgage – so the mortgage-free have also benefitted from an additional six years of property price rises, building up the equity in their home.

Average house prices have gone up for this age group, and now stands at £287,000, from £264,000 in 2016 – an increase of 8% – and is continuing to rise[3]. The effect of housing price rises is even more marked for the older age groups, particularly for those who bought their current property before the housing market boom of the late 1990s.

Accumulated property wealth

The average house value of the 75+ age group in the survey is £310,000 and the average length of time they have lived there is 28 years. In 1994, when they bought their property, the average house in the UK cost £54,623, which represents a five-fold increase in equity.

The picture is also positive for the 65-74-year-olds – their average tenure is 24 years, buying their current house in 1998 when the average cost of property was £66,231. Today, this age group’s property is worth, on average, £302,000. This accumulated property wealth, resulting from the growing housing market in the UK, will for most far outstrip the resources they have in savings and investments.

Planning later life finances

Taking into account the average outstanding mortgage still owing, the research highlighted the amount of equity people typically have in their property is just under £195,000. This compares with the average held in savings and investments, of £52,000 and shows the importance of considering all sources of wealth when planning later life finances.

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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[1]Aviva research conducted by Censuswide April 2002 – 1507 general consumers aged 45+

[2] Aviva Real Retirement Report conducted by ICM Unlimited April 2016 – 1506 general consumers aged 45+

[3] HMLR’s UK House Price Index