Will the over 55’s invest pension cash in the buy-to-let market, and cause an increase in house prices?
On April 6th 2015 anyone over the age of 55, was given the freedom to withdraw their pensions savings and spend it how they like. Currently, pensions have to buy into an annuity. However, the government changed the law, and it is expected that this money will be used to invest in buy-to-let properties that in turn could push up house prices.
The experts believe that pensioners will want to invest in the UK’s housing market, which in turn could start a property boom. There will be an increase of so called ‘silver landlords’ as the older population invests their funds into buy to let housing.
WHO WILL INCREASING HOUSE PRICES AFFECT IN THE MAIN?
What could be worrying about the first-time buyers and rising house prices, is getting that first foot onto the housing ladder. Pensioners who will be buying property could make it even more difficult for them. There will no doubt be a buying frenzy, when lots of the large pensions will be cashed and put directly on the housing market. First-time buyers will have major competition with cash rich pensioners buying property. There is not enough housing as it is, so this movement will likely push house prices up further.
It is estimated that there could be approximately 400,00 pensioners cashing in and up to 50,000 thinking of property investment in the buy to let market. But there could be a downside to this. An unpredictable and insecure housing market say critics, could be a very unsafe option for their income in retirement.
One investment company member has said that new rules that come into play next month “could bankroll an entire age group of people”. The generation of baby boomers in the 1980’s and 90’s gave the housing market a boost, with ownership of property becoming another example of wealth for the rich and old. Many will get a second chance of buying property with house prices fuelling the property market, and an entire generation of kids will find it extremely hard to buy.
IS INVESTING PENSION POT CASH IN BUY-TO-LET PROPERTY THE RIGHT THING TO DO?
However, there is another warning for the pensioners before they go rushing to invest their funds in property. The buy to let market in the UK can be very unpredictable at times and could leave some pensioners losing money if they put all their money into the housing market. There is also a tax implication too, which may put some pensioners off. 25% taken from your pension is tax-free, but 75% of the remaining income taxed as your income.
There is also another thought that pensioners are too old to worry about being landlords and may even look to sell their property to alleviate this responsibility.
If you are thinking about investing pension pot cash into buy to lets then contact a good offline or online estate agent like housetree.co.uk for help and sound advice for investing in UK property today. If you need to sell your house fast then call us Flying Homes property buyers, we buy any houe for cash today!