Knight Frank Finance: Equity Release still growing

Knight Frank Finance responds to Equity Release Council’s latest figures: ‘Equity Release is still growing’ says David Forsdyke

Older homeowners withdrew £3.92 billion of housing equity during 2019, a four-fold increase on the £946 million taken out a decade earlier, according to data released by the Equity Release Council today.

Later Life Finance products, once regarded as a niche, are now clearly entering the mainstream. This is driven by a mixture factors that include our aging population, the significant amounts of housing wealth held by the over 65s and changes to pension provision.

Having said that, the £3.92 billion of Equity Release lending in 2019 is actually a small decline from the £3.94 billion in 2018, so what’s going on here? Are we seeing the first signs of a plateau?

The data would suggest not. Across the housing market, 2019 was characterised by a lack of urgency by both buyers and sellers. Property sales across the country were down approximately 5% compared to 2015 levels. In London, where the financial commitment of buying a home is that much larger, sales were down approximately 20%.

Like home buyers and sellers, many older homeowners considering Equity Release had paused amid so much political turmoil in 2019, so such a comparably small decline is actually encouraging. Thanks to the political certainty provided by December’s election, we expect a return to growth in 2020, underpinned by a pick-up in both the economy and property market that short term indicators suggest may already be taking place.

The purchasing managers index (PMI) hit a sixteen-month high in January and, during the ten days following the election, Knight Frank transacted more exchanges in central London than any equivalent period since December 2016.

As sentiment improves further, so will demand for Equity Release. We expect a notable proportion of growth in 2020 will come from the high net worth community, whether that be for the purposes of inheritance tax planning, covering the cost of care, gifting funds to children or grandchildren, or simply to top-up income.

This blog first appeared on the Knight Frank website which is available by clicking here.