The latest figures from the Equity Release Council reveal that the resurgence in the equity release market appears to be not just sustainable but also growing. Having breached the £1 billion mark for value of plans in 2013, quarter one 2014 appears to have pushed on from where last year left off.
In the first three months of the year plans valued at £315.5 million were taken out by equity release customers – a number which broke records. It was the biggest amount of quarterly equity release business since the housing boom ended in 2007 and it was the largest amount of any first quarter of any year since records began 12 years ago. These appear to be exciting times for the sector and, it will not take a genius to work out, that should we continue on this path we can expect to see the equity release market break through the £1.25 billion barrier this year.
Clearly this is a positive moment for the sector and I suspect that, with house prices having risen fairly rapidly in a relatively short space of time, a number of potential equity release customers may be looking to access this value sooner rather than later. Again, advisers will be cheered to see any increase in the supply of clients and it is therefore important that we continue with the equity release education process in order to make them aware of this solution.
However, while this is all good news let’s put this into perspective and see the far greater potential we should all be aspiring to achieve. Firstly, looking at the last full year (2013) we can see that yes over £1bn of property wealth was released which in the second half of last year equated to over 10,000 new customers.
But what of the wider picture? In 2012 over 800,000 people retired and while this yearly number drops slightly as we move forwards, by 2017 we will still have over 650,000 new retirees per year. Pensioner homeowners own nearly £800bn in unmortgaged property, an increase of over £33bn in the last year and (given the way house prices are moving) likely to increase just as rapidly over the course of the next 12 months.
Taking that £800bn figure what should the equity release market be looking at as an achievable target for business levels? Some might say 1% – this would mean that equity release customers would be releasing £8bn of equity through plans during the course of any year. This is eight times the level of the current market and goes a long way to showing that at present we are merely scratching the surface of what could be achieved. We should be aiming our services at this much bigger market place of retired people who appear to have a growing asset to access.
We can see from this there is huge scope for an increase in business, and while the recent Council figures show an improvement, are we missing a trick in terms of moving this sector towards the figures outlined above? Part of my role is to talk to equity release advisers, and at our recent Masterclass session, attendees were asked if they had recently seen an increase in equity release business – only one person put their hand up.
Therefore while the market is growing by a small amount my opinion is that many more people who could potentially benefit from equity release have a) no idea the solution exists, or b) are unaware where they can secure advice. There is clearly an opportunity for advisers to make the case for equity release here and to tap into this growing marketplace. The problems that equity release can solve are not going away anytime soon in fact all the demographic drivers tell us they are only likely to get worse. And yet at the same time property values are rising. The ball is therefore in our court to reach out to these individuals and to make the case for both equity release and our own services in order to fill the far greater potential of this sector.
Chris Prior is manager, sales and distribution at Bridgewater Equity Release