Senior citizens now sell up, cash in, drop out
Retired home owners are selling up and cashing in on their properties to become part of Generation Rent. Sharon Dale reports.
MORE home owners are stepping off the property ladder to join the 25 per cent of retirees who already rent, according to new research by Prudential.
More than 40 per cent of retired renters are former owners who sold up to release equity tied up in their bricks and mortar.
A new study by Prudential reveals that the reasons for selling were largely financial, though a growing number saw renting as a lifestyle choice.
Two in five were forced to put their home on the market to pay off debts, 19 per cent needed to release funds in order to cover the cost of a divorce or separation and nearly one in ten sold up so they could use the money to boost their retirement income.
Others decided to sell their home and rent so they could help their children financially. Seven per cent used some money from the sale of their property to help sons and daughters get onto the property ladder, while nine per cent used part of the proceeds to help support their offspring in other ways.
Leslie Jones, 68, from Huddersfield, is selling his £200,000 semi to release capital and dispense with the upkeep of the three-bedroom house.
He already co-owns an apartment in Spain with his brother, which he uses for half of the year, and he plans to rent a two-bedroom apartment in Yorkshire.
“I have a final salary pension, which I can easily live off, and I have some savings put by for a rainy day. Even with low interest rates and inflation I’ve worked out that I can afford to rent for the rest of my life.
“I have already helped my son onto the property ladder and he is settled so I don’t feel that protecting his inheritance is an issue.”
Leslie is looking forward to travelling more when he becomes tenant. “I’ll use some of the money from the house to travel, which is why I want a flat that I can lock up and leave without worrying about it. The other major benefit is having no property maintenance or unexpected bills.
“The only negative is other people’s reaction. They think I’m mad to jump off the property ladder when the market is improving and the value of my house looks set to rise. My answer to that is that if I keep the house until I die I’ll never see the money anyway. I intend to enjoy it and travel more while I am still fit enough.”
Although Mr Jones is wellprovided for financially, Prudential is warning pensioners to take professional advice before cashing in on their home to become tenants.
Its survey shows that retired renters pay an average £423 a month for their let, which is twothirds more than the average £257 a month paid by retirees who still have mortgages. It calculates that the average rent will account for nearly a third of the average expected retirement income of £15,300 a year.
Stan Russell, a retirement expert at Prudential, says: “Renting in retirement can make financial sense and accessing property wealth to boost retirement income is a genuine solution for many. Our research shows that many retired renters are perfectly happy with this arrangement.
“However, people should be aware of the extra financial burden they could be taking on if they choose to sell up and rent. I would urge everyone in the run up to retirement to speak with a financial adviser to help them plan and save for the income they’ll need to cover their costs when they stop working.
“The fact that some retirees say they are being forced to sell up purely because of the need to pay off debts is concerning and suggests they are not receiving professional advice. Organisations like the Money Advice Service and Citizens’ Advice Bureau offer free advice and can help enormously in these situations.”
Simon Ketteringham, from Castlehill Estate Agents in Leeds, says: “I can understand why retired people think about selling to rent, not least because it prevents unexpected costs. If something goes wrong with their home they can just ring the landlord to come and sort it out. I can also see why people sell and release equity if they have debts or are struggling to survive on a pension.
“The main issue is that the length of most tenancies is uncertain. Rental agreements are usually 12 months at the most and the landlord can decide to sell at any time leaving you to find a new home.”
Simon suggests there could be a gap in the market for institutional investors to create purpose-built retirement apartments to let.
“There appears to be a market out there and renting to retired people would be a good investment,” says Simon. “They tend to take good care of their homes.”
Overall, 15 per cent of retired renters choose not to own their home as a lifestyle choice, while 35 per cent rent because they don’t have enough money for a deposit and 41 per cent cannot afford home ownership. The majority of retired renters, 58 per cent, have never owned a home and nearly three-quarters of them plan to continue renting for the foreseeable future.