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Retirees and the Buy-to-Let Market

Retirees and the Buy-to-Let Market

Increasingly the average buy-to-let landlord in Britain is a retiree using their pension to invest in rental property in order to take advantage of far superior annual yields than would be made through savings accounts

The mortgage providers Kensington recently surveyed a group of over-40s and discovered that 53 per cent either have invested in property or would be willing to do so. In the over 55 age bracket the figure was slightly lower, with 48 per cent considering a buy-to-let investment. Of those surveyed, 8 per cent already owned rental properties as a source of retirement income.

With rental demand growing all the time, a buy-to-let investment makes sound financial sense at the moment. In the first quarter of 2015 average rental returns have increased by 4.5 per cent according to the letting agents Countrywide. The number of mortgages specifically geared towards the buy-to-let investor has also soared – it now stands at 226, up from 12 months ago when there were only 71 deals available, and 6 months ago when there were 162 on the market.

Research from the letting agents Property Let By Us shows that 70 per cent of landlords viewed their property portfolio as their main pension fund and source of retirement income, with 28 per cent of the landlords surveyed planning to expand the number of properties owned during 2015.

The trend for retirees to put their money into property rather than rely on savings accounts or any other type of investment has been apparent for several years now. Back in 2013 a poll for Consumer Intelligence that spoke to 1500 retirees found that one in three were either planning to or already had invested in property as a source of retirement income, with 55 per cent of those asked saying they would be prepared to sell their home to find their retirement. 

Moreover, there is every likelihood that the trend will continue. Pension returns amongst private sector workers are uncertain; being linked in most cases to share investments or typically converted into annuities which have been performing poorly for years.

Conversely, annual returns on property have been outperforming all other major asset categories for 18 years now, according to research published in The Telegraph in April. Cash savings, on the other hand, were the worst, with low interest rates giving negligible returns. A £1 investment in a buy-to-let property in 1996 is today worth £14.90, when a deposit of 25 per cent and a buy-to-let borrowing mortgage was used for the initial investment.   


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