As of April this year, retirees will have the option to withdraw the entirety of their pension in one cash lump sum. But rather than jetting off to a sun and San Miguel-drenched ex-pat community on the Costa Del Sol, many baby boomers plan instead to invest in a second home as a sustainable source of revenue.
According to recent YouGov stats, 6 per cent of existing retirees live off rental income, while 11 per cent of people currently facing retirement intend to become landlords. Pair that with near-constant press coverage of a housing shortage, and unsurprisingly, you end up with concerns that these savvy silver savers will drive up property prices, especially in and around London, making home ownership even more unattainable for younger would-be buyers.
But before you get out your pitchfork and head off on an ageist witch hunt like it’s 1692, consider the 15 per cent of pre-retirees who state that they actually plan to downsize from their present home to save money. “Attitudes are changing,” says Adrian Walker, director at Old Mutual Wealth. “More people understand that they may need to use value tied up in property in order to help fund retirement.”
This will likely mean an increase in property availability in locations where the value of surrounding homes has steadily risen. “This is likely to free up some family housing while also increasing demand for smaller properties, offsetting some of the constraints on transaction levels that result from mortgage regulation and potentially narrowing some of the gap in pricing on different rungs of the ladder,” says Lucian Cook, head of residential research at property group Savills.
While ‘buy to let’ has proven significantly more popular than other mainstream investments in the last couple of years, it shouldn’t be considered an instant win, and it isn’t necessarily the right choice for everybody. It requires clear thought, strategy, and hard work, regardless of age.