House prices rising twice as fast as pensioner incomes: ERC

The Equity Release Council's analysis of ONS data 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.

The 148% increase in house prices once adjusted for inflation has outpaced the growth of pensioners’ investment income (which fell 20%), state pension income (which increased 59%), and income from private pensions/annuities (which increased 114%).

Alice Watson, Head of Marketing at Retirement Advantage Equity Release, says the figures "reinforce why it is now so important that people approaching retirement think seriously about what their property wealth could do for them when they retire".

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.

“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.

“With economic turbulence affecting investment returns and putting government finances under added pressure, housing equity is likely to be an increasingly important source of income for pensioners for years to come.”