Could Budget pensions overhaul put a rocket under house prices? Wave of pension pot cash set to surge into UK property
The liberation of pension pot cash announced in Wednesday's Budget could pour further fuel on the already flaming UK property market, experts warned this week.
As retirees no longer have to buy an annuity with their savings, it is likely that many will choose to plunge their cash into the buy-to-let market.
Property is already seen as a popular alternative or supplement to an orthodox pension, and a wave of extra funds could soon boost house prices that are already surging thanks to the Government's Help to Buy scheme - part of which George Osborne extended in the Budget.
Housing market boost: In this year's Budget, George Osborne said he would extend the first phase of Help to Buy and support the construction of another 120,000 homes
Mortgage expert Dominik Lipnicki told the Daily Express, 'Without doubt these changes will see more people entering the buy-to-let market.
'Time was when those reaching pensionable age would automatically buy an annuity but that's no longer the case. The game has changed.'
The prospect of a fresh injection of investment cash into property comes amid abundant evidence that the housing market is heating up - from the return of gazumping and the spread of 'open house' viewings to a stream of upbeat house price data.
Property website Rightmove said this week that asking prices hit a record high of nearly £256,000 in March amid a 'spring seller rush'. Rival website Zoopla meanwhile claims that the proportion of properties on the market with a reduced asking price has fallen to a four-year low, at 27 per cent.
The Office for Budget Responsibility estimates that property values will rise 8.5 per cent this year and 7.8 per cent next year.
First-time buyers could end being one of the biggest losers from the Chancellor's pensions overhaul as retiring workers snap up one and two-bed properties, warned James Lloyd, director of the Strategic Society Centre, a public policy think-tank.
First-time buyer home purchases are up by 30% on a year ago thanks to Help-to-Buy.
He said the Chancellor had released 'potentially as much as £120bn from pension schemes'.
Some financial advisers argue that property is not such a tax-efficient option for workers on the verge of retirement but Mark Harris, chief executive of mortgage broker SPF Private Clients, disagrees.
'Strong yields mean investors can enjoy a healthy income,' he told the Financial Times earlier this week, 'with the added bonus of generous tax breaks, such as the ability to offset mortgage interest, maintenance and management costs against the rent.'
Richard Lambert, chief executive of the National Landlords Association, said the changes would make housing 'a more financially viable option for providing an income in retirement' and encourage investment that would create homes for 'the future generations of renters who will increasingly look to private providers to meet their housing need'.
Rightmove this week said house prices rose 1.6 per cent across the country month on month.
Most watched Money videos
- Rolls-Royce showcase first ever SUV entitled the 'Cullinan'
- New Rolls-Royce Cullinan includes fold out seats from the boot
- Pension guide specialists help people to understand their options
- The Pru (Prudential) literally put an elephant in the room in ad.
- Take a look at the design of Tudor set for Wolf Hall
- House price increase due to high demand for property
- Take a look inside the classic Ford Sierra Cosworth RS500 car
- How to create a This is Money Power Portfolio
- City comment on if HBOS trio are to blame for financial crisis
- London Paralympics star Jonnie Peacock shares his story
- The original Peugeot 205 Bombardier Ad (archive)
- How to hire an architect for your self-build house project