Strong house price growth has led to many people purchasing property as a means of building their retirement income, according to the English Private Landlord Survey 2021.
The two most prevalent reasons for becoming a landlord were a preference for investing in property rather than other investments (42%) and as a pension contribution (40%).
When asked about their role as a landlord 54% of full-time landlords said it was as a long-term “pension” investment. 58% of buy-to-let landlords said the same.
However, anyone wanting to use property as a means to build a retirement income must be aware that maintaining properties can be costly and ploughing all your money into property leaves you vulnerable should there be a market crash.
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said: “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.”
