Two in five retiring property owners plan home improvements as house prices rise

15 June 2014 | The Equity Release Council

 

But many who want work carried out are held back by a lack of funds


- 29% who want to improve their homes can’t afford to spend anything
- Average spend estimated at £10,000+ but one in five have less in savings
- More than one in four would consider equity release if savings are not an option
- Redecorating seen as the best way to add value to their homes

With rising house prices increasing the chances of over-55 homeowners staying in their current homes, nearly two in five (38%) are considering home improvement projects according to new research by the Equity Release Council (The Council).

More than two in five (42%) say they are more likely to remain in their existing home as a result of rising property prices – over twice as many as the 17% who are tempted to downsize in order to cash in on the extra value in their property.

Nearly two in five (38%) also want or need to spend money improving their homes, with one in four (25%) more likely to do so as a result of rising house prices.

But among those who want to improve their homes, nearly one in three (29%) cannot afford to spend anything and expect they will have to make do with their home in its current state.

Kitchens are a priority for investment


The kitchen is a main focus of investment for over-55 homeowners: 37% say this is the part of their home they have spent the most on in the past and 20% say it is the one that is most in need of repair or renovation, placing it first on both counts.

Bathrooms and bedrooms were each cited by 17% of over-55 homeowners as their priority for repairing or renovating, influenced by the fact that both are among the top three parts of the house that homeowners would be most ashamed of showing off to visitors.

Table 1: Over-55 homeowners’ views: which part of your home

 

Are you proudest of when showing visitors?

Are you most ashamed of showing off to visitors?

Have you spent the most money on?

Is most in need of repair or renovating?

Living room – 58%

Outside areas– 29%

Kitchen – 37%

Kitchen – 20%

Kitchen – 13%

Bedroom(s) – 20%

Living room – 28%

Bathroom(s) – 17%

Garden – 9%

Bathroom(s) – 14%

Bathroom(s) – 14%

Bedroom(s) – 17%



However, redecorating is the home improvement that over-55s are most likely to make: 56% want to make this change, ahead of making garden improvements (36%) or installing a new kitchen (35%), bathroom (32%) or energy efficient improvements (25%).

This suggests that with budgets stretched, over-55s are focusing their efforts on affordable improvements that can also add value to their homes (see below).

Redecorating the way to add value


One in five (20%) who want to spend money on their homes will do so to add value, and redecorating is seen as the best way to achieve this: 20% view this as the way to add the most value to their home, followed by installing a new kitchen (17%), adding an extra room (12%), getting a new conservatory (10%) or converting their loft (8%).

While redecorating adds less value than other more expensive improvements, the potential return on investment is far greater than other improvements (see table 2).

Table 2: Adding value by making home improvements

Type of home improvement

Ranking by over-55s in terms of adding value to their home

Cost of home improvement*

Value added to home***

Redecorating

1

£232/room**

£2,000

New kitchen

2

£8,000

£16,000

New room/single story extension

3

£23,000

£16,000

New conservatory

4

£13,000

£12,151

Loft conversion

5

£30,000

£20,000

New bathroom

6

£1,500

£3,351

Of the top five value-adding improvements identified by over-55 homeowners, a loft conversion adds the greatest value (£20,000), but costs more than this to install – suggesting it is better suited to those who want to remain in their property and need additional space.

In contrast, the value gained from installing a new kitchen is double the initial cost.

Stretched savings pots unable to cope with costly home improvements


The majority (84%) of over-55 homeowners would first turn to their savings to fund home improvements. The average spend among those who can afford to have work carried out is £10,091, but with one in five over-55s (20%) having less than £10,000 in their savings pot – and 8% having no savings at all – not everyone is able to rely on this source of finance.

As a result, a quarter (26%) have put off important repairs or changes to their home because of a lack of money, while 19% have carried out improvements themselves because they could not afford outside help. Nearly one in three (29%) of those who want to make home improvements say they simply cannot afford to do so.

If savings were not an option, 27% would consider using equity release to fund home improvements. A quarter (24%) would turn to a credit card while nearly one in ten (9%) say they would remortgage their home, but may run into difficulty in both cases given many lenders’ reluctance to lend to older customers.

Nigel Waterson, chairman of the Equity Release Council, commented:


“As house prices continue to rise, it’s unsurprising that many over-55s have decided to side-step the cost of moving by remaining in their current property and investing in home improvements instead. Whether they do this to get more enjoyment out of their home, add value or simply make life easier and more practical, home improvements can be a great way of turning a family home into a dream property.

“However, home improvements can rack up an extensive bill, especially in the case of structural changes such as extensions or conversions. Not everyone has a large savings pot to dip into, and it would be unwise to eradicate savings in the approach to retirement. Consumers should consider equity release among their options to turn their home into the one they aspire to live in during retirement.”