House prices up 3.9% in a year

Do you feel 4% wealthier than you did a year ago?

According to the latest Nationwide house price survey, the average value of a home has risen by 3.9% during the past twelve months, to stand at £170,825 today.

This means average house prices experienced their biggest year-on-year increase in nearly three years in July.

Compared with June, average prices rose by 0.8%, with Nationwide describing this rise as “robust”.

They also noted that housing stock is still in relatively short supply, with rental costs continuing to rise.

House prices are a useful indicator and influencer of consumer confidence.

When the value of our property is rising, we feel more confident about making important spending and investment decisions, as we feel generally wealthier.

Many of the client with whom we work have significant amounts of wealth invested in their main residential property.

Often the value of property, even after mortgage debt has been deducted, will dwarf the value of pension benefits. In fact, many still view the value of their house (or at least part of it) as a potential source of income in retirement.

But do you feel nearly 4% wealthier today than you did a year earlier.

For many, this house price survey will feel detached from the reality of their own situation. Rather than a ‘housing market’, we tend to experience ‘housing markets’, with local and hyper-local housing markets all behaving differently.

Indeed, reporting the story today, a commentator on the BBC News website noted that many regions are still experiencing a far from healthy housing market, particularly in the North of England.

Even in the affluent South East, where the housing marketing is generally considered more robust, our own personal experience suggests that there is a real lack of first time buyers in a position to proceed, many struggling to access mortgage financing despite government schemes to boost this activity and record low interest rates.

Hearing that our homes are worth £40,000 or £75,000 more today than they were this time last year is unlikely to directly influence our spending decisions.

Getting access to that money is far from simple; remortgaging or selling property to ‘release equity’ is often complex, time consuming and expensive. And of course you still need somewhere to live.

Once downsizing has taken place, tough decisions need to be made about what to do with the released capital, how to save or invest this substantial capital sum in order to generate income or beat inflation, maybe even to participate in the rising value of the housing market.

This is why we often find that the goal to downsize in retirement is far from simple.

Relying on property value to fund retirement, even when they appear to be on the rise, can be a complex strategy which requires careful planning and a detailed analysis of the various options involved.