With a lot of uncertainty over pensions, is it wise to put your retirement fund into bricks and mortar instead?
With pension pots relying on the uncertainty of the stock market performance of investments to get a return, it is unsurprising that many people are looking at alternative methods of making a retirement income for themselves.
On retirement, most use their pension savings to buy an annuity, but low yields on gilts and many people living longer has meant that this option offers poor value for many. With even economic experts now indicating that property is a better retirement investment plan than a pension, it is unsurprising that many are taking this advice.
House prices
With house prices rising just 2.9% in the first half of this year, and predictions of a 2% rise over the year as a whole raise some questions. The appeal of property investment, however, is due to the much larger rises that have taken place over the last decade. London property has seen a 70% increase in that time and south-east England has enjoyed a growth of 37% which still makes property a tempting investment for the long term.
In addition to simply putting money into property, the buy to let boom has meant that many can also enjoy a regular monthly income as well as the final asset price. Changes to the laws surrounding buy to let property are now changing, and this is impacting on how much money can be made from this type of venture in the future.
The boom and bust phenomenon saw major yearly house price increases turn into a credit crunch and then a recession where lending slowed and many could no longer buy, driving a demand for rental property. New affordability tests and tighter regulation and has meant mortgage approvals have dipped and stamp duty changes have done little to change the market.
The Future
The London property market seems to be stalling and prices are falling to help buyers continue to move up the ladder, with only wealthy overseas investors seeming to benefit.
This dramatic turn of events show that it is difficult to predict the future of property, but some analysts suggest that while London prices will receive minimal growth next year, the rest of the south east and east of the country will see a different picture emerging.
The economic uncertainty surrounding Brexit means that any future predictions are subject to change, there are few predictions of any house price plummets in the near future. Nonetheless, this feeling of uncertainty has meant that a smaller number of people are putting their homes on the market and an even weaker pound coupled with an inflation surge could lead to a rise in interest rates and a very restricted level of growth when it comes to house prices.
With so many predictions floating around, it can be difficult to know whether property investment at the moment is a good move or not. If you have few restrictions, then investing in buy to let property in high yield areas such as Esher or Oxford can bring greater returns than similar properties in London. Serviced apartments are expected to be a very fast growing hospitality sector, and so investment in this type of property is an attractive proposition, with the growth of the staycation and increased tourism after Brexit.
Outside of London, investments in Bristol, Birmingham, Manchester and Liverpool are increasingly in demand with redevelopment and gentrification making them much more desirable areas.
Despite all of this, pensions are still considered a safe investment as there is little chance of getting out less than you put in. However, property is still very attractive to many even if prices aren’t rising everywhere as much as their owners might have hoped.
