Login

Pension Reforms Could Affect UK Property Market


Tuesday, April 14, 2015
Pension Reforms Could Affect UK Property Market

Pension Reforms Could Affect UK Property Market

Rise of Pensioner Landlords Could Have
Dramatic Effect On UK Property Market

As most people are already aware the UK pension rules changed on 6th April 2015, allowing people aged 55 and over to withdraw all or part of their pension pot to spend as they prefer rather than being forced to buy some form of annuity.

It is estimated that around 400,000 people retire every year in the UK with fully paid up pension contributions, leading some economists to believe that the pension reforms could spark an influx of new investment into the UK’s private rental sector (PRS) as pensioners turn to purchasing property using buy to let mortgages as an invest their retirement savings.

There are a number of factors that suggest that the potential for growth in the UK’s private rented sector will continue for some time.

  • The UK population has increased by 5 million people over the last fifteen years, putting increased pressure on the nation’s housing market, with demand far outstripping the supply of property.
  • In the last 5 years the private rented sector has expanded from 2.4 million rental properties to approximately 4 million rental properties, due to the undersupply of property available for residential purchase.
  • Over the past year, UK property assets have seen an average return of 15%, equating to £27,475 per property, while across the buy-to-let sector, capital and income returns totalled £124 Billion (GBP).

Data published by Rightmove, shows that there were 115 Million visitors to their website during March 2015, viewing 1.6 Billion pages of available properties, up 19% on 2014 data, so the interest is definitely there.

The Rightmove data suggests that it is not just first time buyers using the property portal to look for their first property purchase or families hoping to move up the property ladder, but many of their visitors were retired people looking for investment property opportunities.

This apparent change in property purchaser demographic could have a dramatic effect of the UK property market in the next few years, with the following pro’s and con’s affecting the market:

  • Demand for property increases so property prices will rise further.
  • More properties being removed from the open sales market as estate agents are already reporting enquiries from people planning to cash in their pension pots and invest in buy-to-let property.
  • Increase in the number of buy-to-let mortgage products available on the market
  • Confusion over the sheer number of mortgage deals offered in the buy-to-let mortgage market.
  • Help to Buy for new build properties extended beyond 2020
  • Financial considerations for new landlords purchasing using pension funds, as new pensioner landlords will need to consider financial planning more carefully.
  • New pensioner landlords and property investors may not be aware of the pitfalls of buy-to-let.

Recent figures published by the National Landlords Association (NLA) show that in September 2014 – 27% of landlords who let out a single property and 19% of landlords who let out between two and four properties either break even or run at a loss. The NLA estimates that such cases represent almost half of all UK landlords.

Pensioner landlords will also need to decide whether or not they are going to use a letting agent to manage their property and deal with the stress or become a hands-on landlord who deals with everything that the private rented sector demands.

The Government has stated that they will guarantee every new pensioner face-to-face information and personal financial guidance, usually this is given by the pension fund that pensioners have saved into.

However, there is an opportunity for property managers and letting agents to increase the number of services that are offered to their landlord clients, including Tenant Referencing, Tenant Liability Insurance, Rent Protection Insurance and even Tenant Eviction services, especially if they utilise the specialist products and services offered by the UK’s leading supplier to the lettings and property management industry – Legal 4 Landlords.

To discover the wide range of specialist products and services available to landlords, property investors, letting agents and property managers – Click Here!


This was written by Mike Clarke. Posted on at 11:30 am. Filed under Buy To Let, Landlord News. Tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink. Follow comments here with the RSS feed. Both comments and trackbacks are currently closed.