Buy-to-let investments close in on matching pensions

Buy-to-let investments close in on matching pensions

The value of money put into property for the purposes of rentals is now slowly but surely catching up to that put away by those saving towards their pensions, according to figures released this week.

Details from Telegraph Money have shown that in the past few years the spending by landlords - especially those who are operating on just a small basis - has climbed time and again as the potential for strong returns has increased.

Yields have remained at around six or seven per cent for a number of years now as the levels of demand for rented homes has managed to stay strong, and this has driven investor sentiment higher and higher.

Telegraph Money said that as a result, there is now some £1.25 trillion of housing stock that is owned by buy-to-let investors, which puts it almost in line with the amount of money that is currently held in pension funds through employee contributions.

It said that this has been driven because of two realities. On one hand, pension saving is seen as being complex, hard to understand and uninteresting, while buy-to-let is exciting, new and returns can be seen almost immediately.

The process of buying-to-let is now growing at its fastest rate ever, spurred by rising rents and house prices and cheap mortgages, and it is something that is predicted to increase in the next year as well, with the new governmental rules meaning that people will be able to spend money they have been saving for their pensions.

It is thought that many people will take advantage of the new reforms in 2015 to get themselves onto the buy-to-let ladder. 

The desire to buy homes for the purposes of renting them out is hardly a surprise at the moment. As well as the relative ease of investment and the potential for strong returns, it is simply performing higher than any other asset type.

Former economist Rob Thomas investigated how much £1,000 would be worth now if invested 18 years ago in certain assets and found that buy-to-let buyers would have seen average returns of 16 per cent per year, far stronger than the likes of commercial property, equity, bonds, stocks and cash.