Most people dream of a comfortable, long retirement, but with the current state pension sitting at just £125 per week, and the full new state pension (for a man born on or after 6 April 1951 or a woman born on or after 6 April 1953) just £168 per week, the reality is somewhat sobering.
A recent survey, commissioned by leading UK property developer SevenCapital, has revealed that around 40 per cent of the UK population aged 16 and above has so far made no investment to help secure their future, with, surprisingly, 50 per cent of 45-54 year olds also reportedly falling into this category.
In London this figure falls by a margin, however there are still more than one in three people without any investments to help safeguard their future. Widen this to the South East and worryingly this figure rises to nearly half, at more than 46 per cent of the population.
Andy Foote, director at SevenCapital commented: “These are considerably bleak figures when you consider that the average person could now easily enjoy up to 20 years or more in retirement, with the average person expected to live into their 80s. Relying on a state pension alone to fund a retirement for this length of time would mean a significant reduction in standard of living for those accustomed to a particular lifestyle, and home, during working years.
As a result, saving and investing is a must.
Of the remaining 63 per cent surveyed in the capital who are investing in some way, a quarter (25 per cent) have put savings into property – higher than the UK national average of 19 per cent - with ISAs the second most popular investment option (23 per cent) followed by gold and shares (both 11 per cent).
Interestingly, more people (over 42 per cent) would choose to invest in property if money was no object, shortly followed by land (24 per cent) and gold (21 per cent), versus only 12 per cent who would choose ISAs as their number one investment choice. In fact, ISAs don’t even make the top five for preferred investment options, given the choice.
So, what is it about property that is so attractive as an investment? Amongst other investment options, as the stock market remains unpredictable, are bricks and mortar a safer investment and could they mean the difference between a comfortable retirement and pension poverty?
Looking at the top three preferred investments it’s clear that the most popular come in the form of tangible assets, of which property is perhaps the most tangible – it’s something that can be seen, touched and that cannot easily be swiped away.
Secondly, it’s important to be clear that investing in property should mean investing your money in an extra asset(s) designed to create extra wealth and/ or an additional income source – versus simply investing in your own home.
For those who have a significant sum to invest and want to make capital gains in the short term, ie over two to three years, “flipping” property can often be a viable option. This is whereby an investor buys the property at a relatively “low” price with the intention of selling it (flipping) at a later date for a much higher price.
As with any investment this method is never guaranteed, and research must be done into the likelihood of the property appreciating rapidly in value during this time.
However, with “flip” opportunities becoming harder to come by, many seasoned investors would insist that the best way to make money from property over the long-term is by buying for both capital gain on the value of the property and for rental yields, which hold the key to providing passive income.
Whilst a net yield should be earned on the property after covering mortgage repayments and any service charges, once this mortgage is paid off, this yield becomes a much more valuable source of passive income. Depending on the property market, area and number of properties owned, this can provide a very good monthly income, so much so that many landlords treat their property portfolio as a business in itself.
This comes back to retirement provision. Whilst the initial investment for property is relatively high (buy to let mortgages are generally higher than homebuyer mortgages) in comparison to many other investment products, the long-term potential for ongoing passive income well into retirement, and wealth creation through capital growth, should the desire to sell arise, can be huge.
SevenCapital is a leading UK property development and investment company, specialising in residential property investment opportunities in both the midlands and south east, including Birmingham city centre and along the Elizabeth line from Slough.
To find out more about investing for retirement and investment opportunities with SevenCapital visit the website.
Alternatively email firstname.lastname@example.org, mentioning City AM.