Prudential is predicting a property nightmare for baby boomers who are relying on their homes to fund their retirement.
A report commissioned by the Pru from Datamonitor called Equity Release in the UK suggests four million homeowners are relying on their properties to form part of their pensions in retirement and that if they all sell up and downsize to access the equity it could unleash housing havoc.
The result would be first time buyers competing head-on with baby boomers for the same properties.
The report predicts upheaval in the property market if people currently aged between 50 and 60 start trying to realise the wealth they have locked up in their homes in an effort to plug the pensions gap. There is a shortfall of £70,000 in the average pension pot, suggesting that even a move to the bottom of the property ladder would not realise the equity needed for a comfortable retirement. The report concludes that an attempt to move home by baby boomers to release capital would be self-defeating.
David Parry of Datamonitor, the report's author, says: “The more people try to sell up, the more the difference between the selling price of the family home and the buying price of the retirement property will be reduced, forcing retiring couples to downsize. This will take them further and further from their ideal and toward homes that are smaller, in worse condition or in worse locations than they want or are suitable for people in retirement.”
Pru director for equity release Ali Crossley says: “If people simply sell up, our research predicts property mayhem. It could become a case of property snakes and ladders as pensioners clamber down the ladder and larger family homes become more affordable to younger people.”