Properties are being used to fund retirement | CPS Homes

Properties are increasingly being used to fund retirement

House prices rising

The latest consumer research by Baring Assessment Management (Barings) has revealed that around 6 million people (roughly 16% of the people surveyed) are planning to rent or sell property as the primary way of funding their retirement. This number represents a 3% rise on the figure reported in 2013 and is the highest figure recorded since 2009.

Conducted by ICM Research on behalf of Barings, the research also found that one in fourteen (7%) non-retired people are planning on selling their primary residence as a way of funding their retirement. This number represents a 2% increase over the figures reported in 2013 and translates to roughly 2.5 million individuals ultimately planning to invest in the property market to fund their retirement plans.

The economic climate still impacts on property funding

The economic downturn in 2008 has had lasting repercussions across several industries and as money has been increasingly stretched further by the cost of living, more people are concerned about how they're going to fund their retirement. The study revealed however that a growing number of people (4%) plan to sell or downsize a property to generate extra income.

The study also revealed that 33% of people who had previously planned to fund their retirement through selling or renting a property still intend to do so, while 1.3 million people (3%) revealed plans to rent out a secondary property to generate additional income.

Regionally, the report indicated that residents of the West Midlands are most likely to use their property as an asset class, with 6% of individuals planning to sell their primary residence and 21% planning to sell or rent secondary properties to fund retirement. On the other end of the spectrum, only 5% of people in Wales admitted to having plans to sell their primary home, and only 5% admitted plans to sell or rent out a second property.

Relying on property funding is a risky business

As the number of homeowners looking to sell property as a means of funding their retirement continues to grow, and shows no signs of easing, it could prove to be a very risky strategy. Property prices can be extremely volatile, increasing and decreasing in value within weeks, and is very dependent on the needs of a property market that can be difficult to predict. Rod Aldridge, Head of UK Wholesale Distribution at Barings pointed out that while property can be useful as part of a diversified investment portfolio, it shouldn't be relied upon to fund retirement completely.

Mr Aldridge has called on property owners and investors to understand the risks associated with expecting property investment to be the sole guaranteed source of retirement income, and said that people should plan for their retirement in alternative ways and diversify their investments through a range of assets, which can include, but should not be limited to just property.

Here at CPS Homes, we understand that many individuals invest in properties to safeguard their financial future, and we actively encourage this for people who can afford to do so. Although we agree homeowners should consider other assets alongside property as a way of funding their retirement, we think it's definitely a great place to start! If you're thinking about taking on a buy-to-let property or fancy purchasing a property to redevelop, please contact our team for friendly, helpful advice, or drop us a message on Facebook, Google+ or Twitter.

19 November 2014


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