Is Investing in Property a Good Idea for Your Retirement?

Written by Karen Bryan

With advancements in technology and the health sector, the population is living longer than ever before. A report from Public Health England stated that men can expect to live for another 19 years and women for a further 21. Therefore, the ways in which you can invest for retirement are evolving over time. Pensions were long considered the leading way to save money to use after retirement, but there is an emerging trend of investing in property that is now seemingly more lucrative.

Let’s take a closer look. The property market has long been regarded as a prosperous form of investment, however, with the speculation over Brexit in the media, uncertainty began to circulate leaving trust dwindling due to the perceived last of security in the asset. House prices are deteriorating, and the North/South divide is increasing, although contrary to this, current research has highlighted that buy to let investments in property have the potential to triumph over pensions in terms of long term growth and returns.

Property values have risen dramatically over recent decades which has enticed investors to build on and diversify their existing portfolios, as well as attracting the attention of first time investors that see a window of opportunity.

Headlines across the media warned that the UK property bubble may have burst across certain regions, and with house prices in London falling at their fastest pace since 2009, it was evident that the London property market had begun to suffer. Landlords are moving to the North to escape the challenging conditions set by the South. However, it is not uncommon for the market to experience glitches as supply and demand and tax changes have the ability to readjust. Due to the transparency and the flexibility of the property market, it is important to view it as a valuable venture and a top performing asset class that has proven longevity.

Founder of online letting agency Upad, James Davis, says,

Assuming that property prices continue to increase over the coming 20 years in the way that they have in the past 20 years, a property of today’s average value of £235,000 will be worth £1m by 2038.

Even working on the worst-case scenario of not making any monthly profit, you’ll still have realised a significant capital appreciation.”

Davis continues to highlight that a pension investment during the same time frame would require at least a monthly contribution of £1,200 after an initial investment of more than £90,000. Of course, property investments and pensions are two entirely separate entities that work for different people, but if you are purely evaluating the strength of returns, property investment would be the clear winner.

Property investment is one of the strongest asset classes available and is the only asset that provides two different forms of return rental yields and capital appreciation. It is important for property investors to calculate how much disposable income they have, as a property purchase requires large funds upfront for a deposit alongside solicitor fees.

In contrast, pensions allow you to save for retirement more easily as achievable monthly payments can be made over a longer period of time. With that being said, property will certainly outperform a pension in terms of returns, providing the prospective investor has conducted thorough research before committing themselves to their property transaction.

Soaring house prices have meant investors are securing a higher value of returns, whereas to put it simply, pensions will not generate the same value of money. The average pension pot in the UK stands at around £50,000, producing an annuity of just over £200 per month providing you retire at the typical age.

One of the most noteworthy advantages of property investment is that you can cash out at any time, releasing the equity to support your earnings when you need it. Whereas the terms and conditions of a pension to not allow for withdrawal of available funds until you reach the requisite age to cash them out.

RW Invest, property investment specialists, source off plan properties across the UK that are located in thriving hotspots that are ripe for investment. Their main aim is to provide budding investors with long term returns and excellent opportunity for capital appreciation.