Recent research suggests that property investment may deliver more profitable rewards than pensions in the long term.
Despite the stringent mortgage criteria and tax increases, analysis from Armistead Property indicates that there is reasonable evidence to show the property could give a larger reward than pensions, even though it may carry a greater risk.
However, this does depend on the scale of an individual’s property portfolio; the larger the portfolio, the larger the potential for greater rewards.
Using past statistics, AJ Bell data indicates the projected capital and return growth that £100,000 would have in varying scenarios over two decades. The figures compared pension drawdown and pension accumulated over the 20-year period with:
- A mortgage-free buy-to-let property
- Three buy-to-let properties with a total mortgage of £300,000; each property has a deposit of 25%.
[table id=12 /]
[table id=13 /]
Commenting on AJ Bell’s research was Peter Armistead. The Director of Armistead Property recommends that given the volatility of the property market, people should invest in a pension as well in order to spread the risk.
“The research shows that three buy-to-let properties produce £42,000 more than a pension over the 10 years. However, property investment comes with greater risks such as fluctuating house prices and capital growth; void periods; fluctuating rents, maintenance issues, tenant management issues etc. Property is definitely a long term investment and does have many drawbacks as an asset class which a pension doesn’t, the most notable one being lack of liquidity.
“In an ideal world, people should be investing in both a pension and property from as early an age as possible and ideally from your 30’s. It is advisable to spread the risk and have investments for the future in more than one pot.”
