Over-55s are planning more than three million future property deals
03 September 2015
- Only one in seven are planning a property deal as a direct result of pension freedoms
- Nearly one in five will be buying somewhere they don’t plan to live in
- More than 80 per cent say that this will be the last time they buy
Nearly two in five (37 per cent) homeowners over the age of 55 are planning at least one more property purchase in their lives, according to new research by Prudential1. The figures suggest that future dealings in the property market by householders currently over the age of 55 will account for more than three million property transactions, worth a total of more than £775 billion.
However, contrary to some predictions, this does not seem to signal an explosion in property deals fuelled directly by the new pension freedoms. Only one in seven (14 per cent) say their plans have come about as a result of the pension rule changes and just one in 10 think the changes make them more likely to buy a property in the future.
The research results show that investing in property is something that remains popular with the over-55s. Nearly one in five (18 per cent) of those planning a property deal say they will not be buying a home to live in, but will be buying second homes, buy-to-let properties, development properties or homes for their relatives.
Prudential’s research also reveals the scale of the property deals being considered by the over-55s – the average maximum purchase price for their next property is over £250,000. One in five (20 per cent) say they are willing to spend £350,000 or more.
Over four-fifths (83 per cent) of those over-55s who are planning a property deal, say that their planned purchase is likely to be their last. However, not all of the older property dealers will be last time buyers as one in 10 (11 per cent) say they will probably buy again in the future.
Stan Russell, retirement expert at Prudential, said: “There was a lot of speculation that the pension freedoms would spark a rush of over-55s investing in buy-to-let property as a means of generating income in retirement. However our research suggests that this hasn’t yet been the case.
“In fact the process of withdrawing cash from a pension fund to purchase property and potentially generate an income is complex and could result in a large tax bill. Anyone aged 50 or over with a defined contribution pension is entitled to free and impartial guidance from the Government’s Pension Wise service, and many of those considering accessing their retirement savings under the new freedoms would benefit from a consultation with a financial adviser.”
The results of Prudential’s research also show that the biggest motivation for over-55s planning a property deal is to downsize – more than two in five (43 per cent) said this was the reason.
Stan Russell added: “Using money raised from a property sale could prove to be a helpful boost to retirement income for some. But it’s no substitute for starting to save as early as possible to prepare for eventual retirement.”
There is an almost equal split between those who expect to buy a property that’s more expensive than their current home, and those who plan to buy a cheaper property and bank some cash. Around 29 per cent expect to spend more on their next property while 27 per cent say they’ll spend less.
One in three (33 per cent) over-55s who are re-entering the property market are doing so to move somewhere more suitable for older people and 21 per cent are doing it to live in a quieter area.
Notes to editors
1 Research by Consumer Intelligence on behalf of Prudential conducted online between 6th and 10th July 2015 among a sample of 1,157 adults aged 45-plus, including 645 aged over 55.
2 Estimate based on:
- English Housing Survey showing 7.622 million households aged 55+ in England and Wales either owned outright or being bought with a mortgage https://www.gov.uk/government/publications/english-housing-survey-2013-to-2014-headline-report
- National Records of Scotland figures showing 1,028,489 households with 55+ heads of households http://www.nrscotland.gov.uk/statistics-and-data/statistics/statistics-by-theme/households/household-projections/household-projections-for-scotland-2012-based
- Home ownership rate of 58% in Scotland http://www.scotland.gov.uk/Topics/Statistics/Browse/Housing-Regeneration/TrendTenure