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Is property a better investment than a pension?

Date online: 22/09/2016

When answering a question about saving for retirement, the chief economist for the Bank of England claimed property was a safer bet than a pension. Haldane said: “It ought to be pension but it’s almost certainly property.  As long as we continue not to build anything like as many houses in this country as we need to ... we will see what we’ve had for the better part of a generation, which is house prices relentlessly heading north.”

Whilst Haldane’s comment met with some criticism, mainly due to his own wealth and the size of pension he will receive, there’s no getting away from the fact of the matter - the ongoing shortage of housing in the UK means that property is going to continue to be in demand, regardless of occasional peaks and troughs.

Despite Brexit, the property market has remained resilient, with the latest Nationwide House Price Index reporting that house prices were up 0.6 per cent in August. The same can’t be said for pensions, however.

Low interest rates since 2009, coupled with the 0.25 per cent cut recently made, taking the base rate to an historic low, has seen pensions decrease significantly. Several companies have reported spiralling pension deficits, and public scandals such as BHS’ £571m pension shortfall that affected 22,000 pensions have caused people to stop and think carefully about where their money will be safest.

As a result of this, many more people are looking to the property market in the hope of using rental incomes from buy-to-let property as income in retirement. A recent study found that almost half of homeowners over the age of 45 now consider property wealth a vital part of their plans for retirement.

The buy-to-let sector has remained robust in spite of Government measures introduced this year to curb it, with professional property investors simply adapting to the various changes, but it now seems likely that we could see an influx of newcomers to the market, as those who’ve become disillusioned with their pension plans turn instead to property.

Whether you’re thinking of residential, commercial or semi-commercial properties, there’s a world of opportunity out there - maybe now is the time to seize it. Andy Haldane certainly thinks so…

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