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Landlords view growing BTL sector as pension investments: EPL survey

Most landlords see their properties as pension investments, according to the latest English Private Landlord Survey 2021.

It finds that 54% of landlords consider their properties “a long-term investment to contribute to their pension”, points out the report published by the Department for Levelling up, Housing and Communities. This figure rises to 58% among buy-to-let owners. 

But despite rising house prices landlords should not become “overly reliant on property” for their retirements as maintaining properties can be costly and heavy property investment leaves them vulnerable to market crashes, says one analyst.

UK house prices jumped by 9.8% in March on an annual basis, with the average property valued at £278,000, according to the latest house price index data from the Office for National Statistics published earlier this month. 

The number of private rented homes in the country jumped by 45% between 2008-09 and 2020-21, to 4.4 million households. The private rented sector is now the second-largest tenure in England, containing 19% of all households, compared to 14% in 2008-09, when it was smaller than the social rented sector. 

The report finds that 43% of landlords owned one rental property, representing 20% of tenancies. At the other end of the scale, 18% of landlords owned five or more properties, representing 48% of all tenancies. 

The average landlord is likely to be a white man with a median age of 58. The study finds that 55% of landlords are male and 88% identify as white.

Hargreaves Lansdown senior pensions and retirement analyst Helen Morrissey says:“Strong house price growth in recent years has led many people to declare their property is their pension and this love affair can be shown in the huge number of landlords who are looking to use their property portfolio as their retirement income.

However, it is important not to be overly reliant on property for your retirement. The market has remained buoyant for years but that is not to say it will always be so and if we had a market downturn then having all your money ploughed into property could see your investment plummet. You could also find a property hard to sell and this could be especially difficult if you needed to sell quickly to fund long-term care for instance.

Being a landlord can also be costly with stamp duty, legal fees and ongoing maintenance all stacking up over time. A second property will entail extra costs such as higher stamp duty and you will also be taxed on rent and any profits when you come to sell.

If you plan to be a landlord into your retirement, then you will need to factor in the work being a landlord entails and if you aren’t able to do it then you will need to pay someone who can. It is important to take a long-term view of these costs when deciding to take the leap into becoming a landlord.

Some may find pensions to be inflexible – money invested cannot be touched until at least the age of 55 but it is also important to remember that contributions benefit from tax relief and investment strategies are well diversified over geographies and sectors.

This can offer real peace of mind when investment markets are volatile. Not being able to touch the money invested also means it benefits from long-term investment growth which can have a significant impact on your retirement income.

Property can play an important role in retirement planning, but care should be taken not to be overly reliant on it at the expense of pensions.”

The English Private Landlord Survey is an online survey of over 9,000 landlords and letting agents, which downloaded the data for its report in January 2021.

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