by Mark Johnston
Landords Use Property Portfolio for Retirement.
While ‘generation rent’ may complain about a mortgage famine and hope for a house price crash, the current situation is good business for landlords.
It appears that the buy to let’s source of potential income is attracting investors eying long-term rental returns rather than the capital growth from rising house prices chasedin the boom years.
With pensions suffering heavily as a result of the recession, it seems that many people do not trust this type of investment anymore. At a time when annuity rates are falling and pension drawdown changes are slashing retirement income, landlords are putting their faith in property over pensions and intend to live off rental income in their later years.
It is little surprise then that many landlords and buy to let investors plan on using rental income when they retire, as yields in the private rented sector are increasing all the time.
It was revealed recently that rental yields went up to an average of 6.7 per cent in the third quarter of this year, which is up from 6.2 per cent in the second quarter.
Research for Paragon Mortgages shows more than one third of brokers reported that it is easier to obtain buy to let mortgages in the third quarter of 2012 than at any point earlier in the year, this is a higher figure than on similar surveys at any time since 2008.
The research comes after the Council of Mortgages Lenders (CML) said that one in eight mortgages are now buy to let loans, this is the highest level since records began.
According to other research more and more single property landlords view their properties as supplementary income to their pension.
More than 80 per cent of private landlords in Britain intend to use their property portfolios to see them through retirement instead of a pension.
The National Landlords Association (NLA) has stated that a majority of people who buy houses to let want to use the rental income for their retirement. About 61 per cent plan to live entirely off their rental income when they retire, and 39 per cent say they will choose a retirement date based on the state of the housing market and their investments‘ value.
Phil Rickards, head of sales at BM Solutions, suggested that “It is clearly evident that Britain’s love affair with bricks and mortar remains strong with many landlords looking at property investment as a supplement to their pension in retirement”.
David Newnes, director of LSL Property Services, pointed out: “Rising rents are delivering strong yields to investors, making a powerful case for the buy to let market for those looking for long-term investments for their pension provision. Becoming a buy to let landlords is an increasingly popular way to boost retirement income”.
However landlords ability to live off this income would depend on the state of the property market once they reached retirement. Only a small proportion actually planned to sell all of their properties at retirement.
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