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CGT Rise Will Not Hit Property Market

22 June 2010

•Retired homeowners own property wealth of £767 billion, Key Retirement Solutions says

Retired homeowners own property wealth of £767 billion, Key Retirement Solutions says

The increase in Capital Gains Tax to 28% will not lead to house price falls with sellers flooding the market, says leading independent equity release adviser Key Retirement Solutions.

But continuing economic uncertainty is likely to mean recent house price increases slowing down, Key Retirement Solutions says.

Rumours that CGT would rise to 40% in the Emergency Budget had sparked fears of sell-offs by the UK's 250,000 second home owners and by buy-to-let investors keen to avoid the higher rate with the increase in sellers hitting house prices.

But Key Retirement Solutions says the decision to limit the rise to 28% from 18% and to introduce the new rate immediately means the effect on house prices will be minimal.

Its Pensioner Property Equity Index* shows homeowners aged 65-plus owned property wealth outright worth £767.06 billion at the start of June and gained £1.875 billion in the past three months.

Colin Taylor, Chief Executive at Key Retirement Solutions, said: "It's good news for anyone considering equity release that house prices are unlikely to fall as a result of the Emergency Budget raising CGT.

"However anyone considering releasing equity from their home should still consider acting now as the outlook for the rest of the year is uncertain with recent increases unlikely to be maintained."

"The over-65s own considerable property wealth outright having paid off their mortgages and have benefited from the historic success of the housing market.

The Pensioner Property Equity Index shows five of the 11 areas in Great Britain suffered house price falls in the past three months with Scottish pensioners the biggest seeing a 7.8% drop in property equity - equivalent to £12,249 - between March and June.

The biggest winners were over-65 homeowners in the North East of England who gained 4.62% on average - around £5,066 each - and those in the North West were £2,152 better off - 1.83% up.

Key Retirement's figures show nearly a third of property equity is owned by pensioners in London and the South East of England - in London over-65s own property without any mortgages worth £124.57 billion while in the South East pensioners own £123.13 billion of property without mortgages.

However property wealth is spread throughout Great Britain with retired homeowners in the South West holding 15.2% of the total housing equity stock and a total of £116.72 billion.

However higher property prices in the South East and London means over-65 homeowners there have more property wealth.

Anyone looking to release equity from their home can request an independent guide to equity release by calling 0800 531 6010 or by visiting www.keyadvice.co.uk/equity-release/request-a-free-guide.

Notes to Editors

* Key Retirement Solutions Equity Release index tracks the amount of equity held in property by people over 65 years old in Great Britain. Figures are based on analysis of data from the ONS Family Spending Report (2009), the Land Registry House Price Index, Registers of Scotland House Price Statistics and ICM (2010).