Pension reform could increase demand for ‘starter’ style property as the popularity of buy-to-let investment grows.

Saving piggyFirst-time investors often begin at the smaller end of the market competing for starter homes and apartments against first time buyers, the investors being able to get cash more readily and benefit from better mortgage terms and rates than first-time buyers.

Property investment, and buy to let income are increasingly popular as the value of bricks and mortar continues to rise whilst a regular income can be generated through renting out a property.

This will bode well for some savvy pensioners who after the right research and consulting with experts and can arrive at a decision this will offer the best return for them though it will not be suitable for all.

First-time buyers and existing landlords could be among those who could be losers if enough people do use their pension pot to buy an investment property this could reduce availability of the house type often most appealing, small houses and apartments, pushing prices up and making it even harder for first-time buyers to own their first property.

Existing landlords could see a glut of rental property becoming available which might affect rental values and therefore yields, however, rental demand remains strong and growing in this area so it is unlikely values will be reduced dramatically and tenants will welcome the opportunity to have more choice.

So what impact do our local Property Experts think this will have here?

Mackenzie Smith Property Lettings and Management

Michael Clarke_MARLA“This is major change and it will be interesting to see what effect it has on the property market. Early indications are that people are being cautious and rightly so. The decisions that people make today relating to their pension will affect them for many years to come so making the right decision is so important.

“Independent financial advice is key and if based on that advice people decide to invest in property then further professional advice is essential. Buying a property to let out is a very good investment over the medium to long term but you have to know what you are doing. Buying a property that nobody wants to rent is not a good investment. Buying a property that requires extensive maintenance could also be a bad investment and buying a property with costly service charges and ground rent could also be a mistake.

“So my advice – proceed with caution and get as much information as you can from the experts. It won’t suit everyone but for some buying the right property to let out could well be a much better option than the traditional annuity.”

Michael Clarke MARLA, Lettings Director 01252 514000

Mackenzie Smith Estate Agent in Hartley Wintney

Stephen Tetlow, Manager and Sales Director Hartley Whitney Estate Agents“Whilst I have not had anybody raise the topic specifically with me, I have introduced the changes into discussion with potential clients as a way of demonstrating the fact that there will undoubtedly be an increase in enquiries for suitable properties to be let out, so that the investor has an additional income stream in retirement.

“In my own view the likelihood is that if anybody has accrued a large pension pot they will have done so by having received ‘good advice’ and therefore they are unlikely to put that at risk by taking large sums out, but if they have a small pension there will undoubtedly be those that will take a risk by investing in buying another property as they will probably see property as high risk but likely high return.

“The bottom line is that in my opinion whilst people will have the ability to do what they want with their pension, the reality is more likely that only a small number will be willing to risk making any major changes in having the security of a regular income stream albeit a modest one in some cases.”

Stephen Tetlow, Sales Director 01252 844015

Mackenzie Smith Estate Agent in Ash Vale

Crawford Moxley Manager estate agent Ash Vale“I’ve not spoken to anybody wanting to discuss using money from their pension pot to invest in property…yet. I think it’s going to take time for eligible people to be aware and well informed enough to make decisions.

“I think once more people become aware of this then there is the possibility that people may choose to put the money into a property however for most people I doubt that the 25% that could potentially be taken out of someone’s pension pot tax free will amount to enough to buy a property outright, and lenders don’t often make it easy for someone over 55 to get a mortgage so there will definitely be limitations.

“Property stock is always tight, these changes won’t increase the volume of property available if anything there will be potentially more buyers competing for the same amount of houses.”

Crawford Moxley, Branch Manager 01252 353030

Davenport Financial Management

Andrew Fagg Mortgage Advisor“I am expecting an increase in people wanting to discuss buy-to-let mortgages, using lump sum availability from their pensions. People will need to receive proper Financial Advice from before taking money from their pensions because there are many issues to be considered.”

Andrew Fagg, Mortgage Specialist 07720353866