House and money

Homeowners aim to raise GBP186bn from downsizing

Homeowners aim to raise the equivalent of GBP186bn to help fund retirement income by selling their homes, according to research from housing investment and shared equity mortgage provider Castle Trust.

Castle Trust’s research shows that around 3.25 million households – 13 per cent of working adults – plan to downsize their home to help fund all or part of their retirement.
 
On average they hope to buy a house 36 per cent cheaper – equivalent to GBP57,400 cheaper, based on an average UK home worth around GBP160,000. And that is just the average, with 11 per cent of downsizers aiming to buy a house at least 50 per cent cheaper to help fund their retirement, while a further four per cent plan to sell their home and not buy another property.
 
Castle Trust, a new financial services company that has launched with the aim of providing a safer way to invest in property and a safer way to buy a home, wants homeowners to be realistic about using their home as a source of income for retirement and to consider to risks of relying on a single property rather than a diversified index.
 
It is offering new investment products called HouSAs which enable savers to invest efficiently in the national housing market via their SIPP or ISA and which provide returns in excess of the Halifax House Price Index.
 
Sean Oldfield, chief executive officer, Castle Trust, says: “We know that many people regard property as a good way to save for retirement – in fact the ONS Wealth and Assets Survey has shown that 60 per cent of people under retirement age think that it is the best way to do so.
 
“However, your home is not an investment unless you are willing to permanently downsize, which only 13 per cent of the population plan to do. This means only about one in eight people plan to access the value in their home to fund retirement and the remainder will be generally heavily underweight housing as an investment. This is extraordinary when you consider that residential property is the UK’s largest asset class - at over GBP4trn it is greater than equities, gilts and bonds combined. It has also historically had the highest risk-adjusted returns of any of the major asset classes.
 
“For those 13 per cent who are considering part of their home as an investment, they should be aware that the value of an individual property can differ greatly from the performance of the national index.”

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