Is your house worth £250,000?

According to the Office for National Statistics (ONS), the average price of a UK property reached £250,000 in December.

House prices were an average of 5.5% higher than the same time the previous year, with a 12.3% increase in London prices.

With price inflation as measured by the Consumer Prices Index (CPI) falling to 1.9% for the year to January, house price growth is clearly outstripping price inflation by a wide margin.

For that matter, it is also significantly higher than earnings inflation, which currently stands at 1.1% a year.

The residential property market is being driven by a series of factors; low interest rates, improved borrowing facilities following government incentives, a recovering economy and low levels of supply.

But does it really matter what your house is worth?

From a Financial Planning perspective, your home is often the largest asset you own, albeit often with a corresponding large debt in the form of a mortgage.

Because we all need somewhere to live, property ownership is viewed as aspirational, and owning your home outright by the time you reach retirement is an important financial goal.

One option often considered by those reaching retirement with much of their wealth tied up in property is ‘downsizing’; either selling the property and purchasing something of lower value, or using an equity release product.

Where we have considered this scenario for clients in the past, they often discover that property does not make a particularly good pension.

The costs associated with buying and selling property, as well as the uncertainty over value and the timing of any sale, can make property a difficult asset to use within retirement planning.

There is also the emotional attachment to consider.

One useful source for determining property values is Mouseprice, which uses the Calnea desktop valuation system to estimate house prices.

In our experience, this system tends to give a realistic valuation estimate, along with ranges and details of other local property sales based on Land Registry figures, which can help when considering the value of your property within a Financial Plan.

Assuming thought that you can afford to maintain your property, and any debt linked to it, and you need somewhere to live, the value of your house is largely immaterial.

It does however prompt an interesting debate.

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