House Prices will Rise in 2015 with New Pension Rules
Experts are predicting that house prices will rise dramatically next year, with the introduction of new legislation that will allow people to invest their pension funds into the property market.
Rise
From April 2015, the legal requirement to purchase an annuity with pension funds will be scrapped. As a result, many people are expected to invest in or purchase properties that will be subsequently rented out to provide them with income during their later years.
Industry analysts suggest that home values will increase to around £190,000 during 2015, a rise of almost £12,000 to the price of an average property. Further estimations indicate that up to a staggering £5 billion could be invested into the market from people withdrawing their pension funds.[1]
Stuart Law, part of buy-to-let specialist organisation Assetz, thinks that property prices in the UK could rise by as much a 7%, following both changes in pension legislation and Stamp Duty cuts. Law said: “As property investment continues to outperform all other major asset classes we will see a surge in buy-to-let as people look to make the most of the cash in their pension pots.”
He continued by suggesting: “If half the estimated 200,000 people looking to cash in a percentage of their pension pots from April 2015 have £50,000 to invest in property, that is an astonishing potential £5 billion injection.”
Furthermore, Law thinks that “canny investors” will look to add to their portfolios in specific regions. He thinks that property investment in the north will be substantial, as they offer “cheaper prices and higher yields than in the South East.”
Investment in property, Law says, will not only boost income for peoples’ retirement, but will also “generate a decent and growing nest egg to pass to their offspring.”[1]
House Prices will Rise in 2015 with New Pension Rules
Considering
Research from insurer Direct Line for Business has indicated that around one third of people aged between 45-64 would consider using some or all of their retirement fund to invest in property.
John Goodall, CEO of mortgage lender Landbay, said that: “The long-term impact of annuity reforms will have a profound impact which isn’t yet factored into most models and predictions for house prices.”[1]
Mortgage expert Dominik Lipnicki stated: “Without doubt, these pension changes will see more people entering the buy-to-let market.”
He also stated that “the game has changed.”[1]
Mark Harris, Chief Executive of mortgage broker SPF Private Clients, agreed, saying: “Strong rental yields mean owners can enjoy a healthy income with the added bonus of generous tax breaks, such as the ability to offset mortgage interest, maintenance and management costs against the rent.”[1]
Richard Lambert of the National Landlords Association (NLA), stated that the pension changes would work to make housing “a more financially viable option for providing an income in retirement.” This in turn, Lambert said, would make homes more readily available for “future generations.”[1]
[1] http://www.express.co.uk/news/uk/549326/House-prices-rise-people-invest-pension-pots-in-property