For many people investing in residential properly remains an attractive income investment at a time of low saving rates and stock market volatility. 

Investors continue to be drawn to property as the returns routinely outperform those of other investments, including government bonds, cash, as well as a pension.

Fresh research from the Equity Release Council shows that residential property prices in England have increased twice as fast as pensioner incomes since 1994/5, confirming what many of us already knew – investing in property is a better investment for retirement than paying in to a pension.

House price growth in England over the past 20 years has far exceeded the gains pensioners have seen from other staples of retirement income such as the state pension, investments, occupational pensions and other earnings, according to the study.

Analysis of the latest data from the Office for National Statistics reveals that pensioners’ household incomes increased by 66% in real terms between over the last 20 years, from £12,664 to £21,026 a year. Over the same period, inflation-adjusted house prices in England increased by 148% from £82,100 to £203,360. This figure is now nearly ten times the size of a typical pensioner’s household income (9.7), up from 6.5 times pensioner income.

Inflation adjusted pensioner incomes and house prices, 1994/5 – 2014/5

Nigel Waterson, chairman of the Equity Release Council, commented: “House prices have experienced dramatic growth over the past two decades, which has given many homeowners’ equity a significant boost. Many older people have seen the value of their home increase at a far greater rate than pensioner incomes, which has game-changing implications for how people make plans to fund their retirement.

“While the growth in house prices has not been linear or universal, strong market fundamentals mean housing equity is likely to remain a sizeable asset for the foreseeable future. It means housing wealth has an indispensable part to play in all discussions homeowners have about financial wellbeing in retirement.

“Government must act to encourage people to think through their options holistically, rather than focusing exclusively on savings and overlooking other choices that could boost their prospective retirement income.”