With warnings that the cost of borrowing is set to rise, further choking off demand, homeowners should no longer be relying on the value of their home rising.
According to Rathbones, property values have increased by only 1.7pc over the past year, around half the pace of inflation, while an investment portfolio has grown 11.8pc before dividends over the same period. “That challenges the long-held assumption that rising property values can be relied on to fund later life,” said Ms Williams.
Property still has a part to play in retirement planning, but until downsizing gets easier, it may remain an unrealistic option for many pensioners. Mr Reed said: “Removing stamp duty for ‘last-time buyers’ would help but retirement housing must be prioritised by the Government if it wants to free up larger family homes.”
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So if you’re banking on using property wealth to fund the next stage of your life, what should you do?
With the Budget less than a month away, buyers and sellers in the middle of a transaction should try to complete before Oct 28 in case of a capital gains tax increase or similar tax rise.
Andy Burnham is reportedly weighing up equalising capital gains tax rates with income tax rates, raising the charge as high as 45pc from a current maximum of 24pc.
If this went ahead, experts warn it could stall the property market as capital gains tax is levied on the sale of additional properties, such as rentals and second homes. Rob Morgan, of investment platform Charles Stanley Direct, said: “The incentive to hold assets longer may increase, and disposal strategies and timing of sales would become more important.”
Mr Burnham could, however, go for the nuclear option: imposing tax on the profits from the sale of main homes. This could raise vast sums of cash – or dry up the market as owners decide not to sell.
Numerous think tanks have called for a stamp duty cut, and the Prime Minister has previously backed scrapping the levy in favour of an annual tax based on the property’s value – suggesting it could one day become cheaper to move.
However, if homeowners put off selling up until that happens, they could be waiting a long time. Mr Burnham has ruled out overhauling property taxes in the next Budget.
Tax rises on high-value homes are already locked in under previous Labour policies. The incoming High Value Council Tax Surcharge – known as the “mansion tax” – is another reason some older homeowners might look to move to cheaper properties.
