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Don’t rely on your home to fund your retirement

Don’t rely on your home to fund your retirement

The government wants to see the housing market depressed in order to make it easier for first time buyers to buy a property.

Experts have already predicted that house prices will fall this year by between 6% and 10% and homeowners are being warned that they should not expect to fund their retirement by releasing home equity.

Councils and property developers will be encouraged to construct more homes, which will depress the market and help first-time buyers.

On Monday, Grant Shapps, the housing minister, said that property should be regarded as somewhere to live rather than an investment. He wants to see a rational housing market where property prices rose by less than salaries. If property values were to fall in real terms this would benefit the millions of young people who are currently unable to afford to buy, he added.

Shapps pointed out that it was crazy for housing to be so unaffordable and that past scenarios whereby house prices boomed over a short period of time was unhelpful.

This may seem hypocritical coming from a man who is thought of as an astute property speculator. He profited by £250,000 on one property deal and his current five-bedroomed home would realise over £1 million if sold.

Whilst it might benefit first-time buyers to have a rational housing market, homeowners who were relying on home equity to fund their retirement will not welcome the move. They have already seen their pension funds severely eroded by the economic crisis.

Homeowners now have to remain in their properties for longer than ever, according to new figures from the CML. They now spend nearly double the length of time in their current home before putting it up for sale compared to the beginning of the recession. In 2007, people stayed about 11 years in a property; now it is 21.5 years.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Bird Houses / 20071230.10D.46705 / SML by See-ming Lee ??? SML

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