The extent to which people draw on their housing wealth in later life is an important issue, with implications for the living standards of current older individuals and their use of other financial resources, the likely bequests that will be received by younger generations, and policymakers’ assessment of the financial preparedness for later life of current younger individuals. Housing mobility at older age also has implications for the turnover and appropriateness of the housing stock.
There is no simple answer to whether individuals ‘should’ spend their housing wealth. It could be used to increase spending, but leaning against that are bequest and precautionary savings motives, transaction costs and the consumption value of housing. Whether any given individual wants to draw on their housing wealth will depend on their preferences. That means that it is necessary to examine empirical evidence to understand how individuals are behaving.
In this briefing note, we contribute an important piece of the jigsaw by documenting the extent to which older individuals draw on their housing wealth, using data from the English Longitudinal Study of Ageing from 2002–03 to 2014–15.
Around 4% of owner-occupiers aged 50+ moved over a two-year period.
Moving is slightly more likely among owners in their 50s and early 60s than among owners in their 70s. From age 80 onwards, the probability of moving increases rapidly with age, driven by moves into institutions.
Current trends suggest over 40% of those who are owner-occupiers at age 50 will move before death.
Cumulating probabilities of moving across older ages suggests that over a third of owner-occupiers at age 50 would move by age 70 if they lived to that age, and over half would move by age 90.
Fewer than 10% of moves were reported to be financially motivated.
The most common reasons for moving were to move to a more suitable home, to move closer to family and friends, health-related (particularly among those aged 80 and over) and to move to a better area (particularly among those aged between 50 and 69).
It is common for housing wealth to be released even when not explicitly moving for financial reasons.
There are two ways movers can release wealth: moving out of owner-occupation and moving to a cheaper property (‘downvaluing’).
Current trends suggest 14% of those who are owner-occupiers at age 50 will move out of owner-occupation before death.
The majority of moves at older ages are not out of owner-occupation: 77% of moves (83% of non-institutional moves) are to another owner-occupied property. The probability of moving out of owner-occupation increases markedly from age 80, driven by moves into institutions, and in the late 80s even once institutional moves are excluded.
On average, those who move to another owner-occupied property do ‘downvalue’.
The median wealth released by those who moved but stayed owner-occupiers between 2002–03 and 2014–15 is estimated to be around £14,000 (or 9% of the property value), not accounting for any costs associated with moving. ‘Downvaluing’ is greater among older movers: among movers aged 50–59, the median wealth released was £4,000 (3%), compared with £49,000 (25%) among those aged 80+.
Changes in household composition are strongly related to releasing housing wealth.
Unsurprisingly, those who become separated, divorced or widowed are much more likely to move, move out of owner-occupation, and release wealth than those who remain married or single.
The financial situation of the household is strongly related to the use of housing wealth.
Individuals are more likely to move if they report not having enough money to do things. Among those who move, the average amount and average proportion of wealth released are decreasing with financial wealth, increasing with housing wealth, and increasing in the housing wealth to income ratio.