The housing market looks as if it could be in for a tough time in 2023.
Despite no real crash kicking off just yet — at the time of writing, at least — I think average prices will continue to slip south during the next three quarters.
Will we see the generational collapse so many tabloid commentators and ‘experts’ seem to be gagging for? I’m unconvinced.
What I am certain of is that this year will not mirror the consistent average 10% annual property price hikes we’ve seen in recent history. Any incoming decline must be viewed through the prism of historical house-price inflation, and the current 1% dips year on year are brought into sharper focus when seen alongside so many double-digit increases over recent times.
It’s the retirement finance alternative many urgently need
But that doesn’t make it any easier. We all live in the now and house prices falling — coupled with higher interest rates and inflation — is clearly not good for either clients or mortgage professionals.
Ultimately, it’s time to batten down the hatches and see what happens. Like any storm, this too shall pass, and I am sure we will see a rebound relatively quickly.
However, beyond pure confidence that the market will rebound, it’s important to view this slide with some real perspective. Property remains one of the safest and best long-term investments — and will most likely continue to be so once we are through this mess.
ERC report
According to a recent report commissioned by the Equity Release Council (ERC) — ‘Later Life Lending: Great Expectations’ — there’s £6.7trn of property wealth scattered throughout the UK, and much of it sits in the hands of those aged over 55, which brings me to my point. People are struggling to make ends meet more than ever, and those who cannot rely on a regular income from work — namely, the retired or soon-to-be retired — need help as much as any other cohort does.
Modern equity release and the spending resulting from lifetime mortgages provide support, directly or indirectly, to 80,000 jobs nationwide
‘What about their pensions?’ you may ask. Well, not everyone has adequate pension provision and, with today’s pensioners living far longer than their parents and grandparents did, alternative finance vehicles are needed — sometimes desperately.
Here’s where historical property wealth comes to the rescue. Again according to the ERC-commissioned report, pension wealth nationwide sits at £6.45trn, which is a shade lower than the national property wealth. For some, therefore, property may be just as important as, if not more important than, pensions in modern Britain.
The ERC report goes on to claim: “For every £1,000 the average employee earns in their final salary before retirement, they can expect just £150 in annual pension from a defined contribution scheme, compared with £670 for defined benefits.”
Property remains one of the safest and best long-term investments
Essentially, most retiring homeowners will have seen a far better return on their property than on their pension, regardless of any small decline we are currently experiencing.
In 2023, property has completely made its case to be a part of retirement finance, and millions of homeowners think the bricks and mortar that surround them are as critical as their pensions to their later life. Now it is a matter of accessing that wealth in a liquid form, which many older homeowners are considering.
Uniquely positioned
Remortgaging or downsizing will always be a consideration, but many will not want to move to a smaller home in retirement and some may struggle to be eligible in the mainstream mortgage market. This is where equity release is uniquely positioned to help tens of thousands of UK homeowners.
Of course, a lifetime mortgage should be undertaken only after receiving expert advice and giving careful consideration. But today’s equity release market can be the retirement finance alternative many people urgently need. With people living longer, pensions not performing as they did and many millions feeling they deserve to stay in the house they call home, a lifetime mortgage could be the solution.
Property has completely made its case to be a part of retirement finance
Beyond this, modern equity release and the spending resulting from lifetime mortgages provide support, directly or indirectly, to 80,000 jobs nationwide, claims the ERC report.
So not only can our products give our clients the retirement they deserve, they can help tens of thousands of people to support their own businesses and personal lives in these troubling times.
Andrea Rozario is chief corporate officer at Bower
This article featured in the April 2023 edition of MS.
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