Despite recent Government tax hikes on buy-to-let landlords, alongside tougher criteria for mortgage lending, a new report has suggested that the correct property investment can provide better returns than a pension.
According to the report from Armistead Property, there are a number of surveys that underline the fact property investment is more profitable.
Portfolio
While pensions were found to beat single-property returns, investors with more sizeable portfolios have the potential to exceed pension money.
Further analysis from AJ shows how much £100,000 would grow in both capital and returns over 10 and 20 years in three scenarios.
Using both historic and housing stats, the forecasts compare investing in a pension with someone purchasing a single buy-to-let property without a mortgage and with someone buying three properties with a total mortgage borrowing of £300,000.
The original £100,000 is split into three, where each third becomes a 25% deposit on a property. Tax features, such as stamp duty, are also factored in with property investments.
The table below reveals the results:
| Scenario | Value of Investment Over 10 Years | Annual Income Over Period (Pre-Tax) | Value of Investment Over Another 10 Years |
| Buy-to-Let (1 x property) | £123,095 | £4,188 | £156,331 |
| Buy-to-Let (3 x properties) | £171,600 | £7,242 | £217,932 |
| Pension drawdown after first 10 years | £203,612 | 0 | £174,008 |
Does property investment offer better returns than pensions?
Risks
Peter Armistead, Director of Armistead Property, noted: ‘The research shows that three buy-to-let properties produce £42,000 more than a pension over the 10 years. However, property investment comes with greater risks such as fluctuating house prices and capital growth; void periods; fluctuating rents, maintenance issues, tenant management issues etc. Property is definitely a long term investment and does have many drawbacks as an asset class which a pension doesn’t, the most notable one being lack of liquidity.’[1]
‘In an ideal world, people should be investing in both a pension and property from as early an age as possible and ideally from your 30’s. It is advisable to spread the risk and have investments for the future in more than one pot,’ he added.[1]
[1] http://www.propertyreporter.co.uk/landlords/can-btl-really-deliver-better-returns-than-a-pension.html
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