A roof over our head. A home for our family. Safety and security. Something for our next of kin to inherit.
Financial advisers will be more than familiar with the many ways in which homeowners describe their property. Less familiar, though, with property described as a source of retirement income.
This is one of the key findings of a new report on property wealth, Home Is Where The Wealth Is, published by Retirement Advantage, which is based on extensive consumer research.
The report aims to provide advisers with a toolkit of facts and practical suggestions on how to guide conversations with clients on a sector that is fast-growing in popularity – but that many are still reluctant to consider.
Some may wonder why this is an urgent issue.
After all, the record £3bn lent in UK equity release in 2017 was half as much again as the £2bn lent the year before, itself the previous record.
But despite this stratospheric growth, that total is still a drop in the ocean compared to the potential £365bn it is estimated could be released from UK housing equity.
Equity release makes a compelling case
The arguments for more people using equity release as a way of supplementing their income in retirement are powerful.
A potent mixture of the UK’s productivity crisis, stagnant wage growth, poor yields and sluggish savings rates means that the switch from defined benefit pensions to defined contribution schemes leaves many facing the prospect of a retirement savings gap that could prevent them from living out their golden years in the comfort they expect.
While the rollout of auto-enrolment is helping more workers to start saving for retirement earlier, even these contributions won’t keep pace with the cost of living if the last decade’s trend of wage growth trailing inflation continues.
Property could be the solution to this challenge.
Not only is it one of the more commonly owned assets, but it’s also one of the few asset classes which has seen a strong, continuous rise in value since the start of the millennium.
At the end of 2017, UK residential property was worth an estimated £7 trillion, with two thirds of that owned by over-55s, and with average property values having doubled in the past 15 years, a mild dip in prices is unlikely to make a significant dent.
For many of those approaching or in retirement, property is the most valuable asset they own – the average house price of £226,000 is well in excess of the average pension pot of £50,000.
More and more customers are recognising the potential of their property and entering the equity release market.
But, as a product, it is held back by common misconceptions around its implications for property, generational gulfs in attitudes, and psychological barriers to viewing the home as a store of wealth.