PROPERTY prices in Scotland were today predicted to soar over the next five years as it was revealed a record number of people are cashing in the equity on their homes to fund their retirement.
House prices are expected to rise by 18 per cent, adding £26,000 to the cost of an average house by 2018. The surge is being driven by government help for first-time buyers, higher earnings and banks resuming high loan-to-value mortgages.
Faisal Choudhry, head of research for estate agent Savills, said: “This is good news for people trapped in negative equity. The stagnation we have seen in housing for the last three years is beginning to subside.”
House prices remain well below their peak of six years ago, but are predicted to rise 4.5 per cent next year and again in 2015 before slowing slightly to 3.5 per cent in 2015 and 2016.
Savills predict house sales to jump around 12.5 per cent from around 80,000 this year to 90,000 next year as a result of the Scottish Government’s Help to Buy Scheme
Meanwhile, analysts said the growth in the Scottish housing market has sparked a significant increase in the number of homeowners taking out equity release plans.
A total of £19 million worth of housing wealth was released in the three months from June to September, a ten per cent increase on the same period last year.
And almost £50 million has been released from properties so far this year, compared with £30 million at the same stage in 2012.
Equity release plans enable homeowners to sell off part of their property, or take out a loan, under the premise that the money gained will be recovered by the sale of their property after their death.
Such arrangements can boost retirement income, but may also impact the level of inheritance eventually left behind.
The average equity release plan was worth £45.337. Edinburgh saw the most activity of this kind, with 84 people taking out plans worth a total of £4.4 million.
Dean Mirfin, group director at Key Retirement Solutions (KRS), said: “Housing wealth can play a major role in retirement planning both as a solution for problems such as interest-only and as a source of funds when other retirement income sources are under pressure.” According to KRS, 70 per cent of those who agree release plans use it to cover bills, while almost half do so to fund lifestyle improvements such as a holiday or new car.