Almost half of buy to let sales in the UK are driven by investors looking for pension returns and overall market is unchanged despite tax changes, new research reveals.
Some 48% of property investors bought a buy to let property with the specific intention of supplement their income during retirement, up 2% from 2015, according to the research from Sequre Property Investment.
Since 2015 the firm has found that the market remains relatively unchanged despite the government’s tax changes in the buy to let sector and it points out that the demand reinforces the notion that pensions are struggling to provide the returns that buy to let can offer for those looking for future income.
The research found that young professionals are also benefitting from the buy to let boom with 15% of Sequre investors aged 21 to 30, up from 13% two years ago. They have chosen buy to let property as the best investment product to suit their needs and some are using property investment as a way to get their first step onto the property ladder throughout more affordable areas of the UK.
The research also found that 13% of investors surveyed were primarily investing for their children and loved ones. They’re looking to physically pass on an income, generating, tangible asset in years to come, or to use the rental returns to give their children a lump sum when needed.
Some 20% of buy to let investors are looking to grow an established portfolio. Becoming a hands off landlord is the ultimate goal for these investors and can be carried out mostly through buy to let leveraging, that is splitting capital and spreading it across several properties, to achieve higher overall returns. This gives investors the ability to earn a strong secondary income, whilst building a solid portfolio which will increase in value for years to come.
‘Each person’s motivation for investing in buy to let can vary, and in many cases, there is a primary motivation followed by several others. Investing in property not only provides great returns when the deal is right, but it’s also a tangible asset that can be held for capital growth or sold for the profit,’ said Graham Davidson, managing director of Sequre Property Investment.
‘Of course, investors need to be savvy with where and what they choose to invest in, so they can fully maximise their return on cash invested. Ultimately, our research shows that motivation is often driven from one of four main ambitions. With pensions and income for retirement being such a huge focus back in 2015, this momentum has clearly stuck with a large majority of individuals and buy to let is still providing the best returns over annuities and many other investment types,’ he added.
Siva Ganesamoorthy is primarily thinking of his loved ones when it comes to property. ‘My investment is for my family’s future, so the returns will mainly be saved but eventually we hope to own a portfolio,’ he said.
‘I was initially attracted by the rental yields of the property, as we’re investing as part of a long term plan. Compared to buy to let, all other forms of investment just don’t add up as they either provide poor returns or are not worth the risk,’ he explained.
David Proctor and his wife Anya, bought their first buy to let property with Sequre in 2015. ‘When we invested, we mainly wanted to create a pension plan with income for my wife. Anya is only in her fifties and buy to let offers both income and a sensible long term capital asset,’ he said.
With a pension plan their main motivation, they have also considered other potential benefits to owning properties. ‘In the short term, the returns will be accrued to pay back the mortgage before switching it to a pension income/salary at an appropriate time. In the long term, we may even look to pass the apartment on to our children as their pensions as they focus on house ownership in the short term,’ he added.
Chris Leck, aged 30, has invested in property and built his portfolio by reinvesting his returns. ‘The line of work I’m in means that I have very little time on my hands and the properties I’ve bought require very little input from me which fits in perfectly with my lifestyle,’ he said.
‘I have a personal interest in property, the potential for growth coupled with the returns and the overall control is really appealing. The more you put in, the more you get out,’ he pointed out.
