Is Housing a Good Choice for a Pension?
Posted by admin Wed, 21 Nov 2007 12:23:00 GMT
In recent years there has been a significant rise in the number of people who are choosing to use property investment as a means of provisioning for their retirement. The growth of the "property is my pension" brigade has been marked by a massive increase in the number of buy-to-let mortgages, from 185,000 in 2001 to 850,000 in 2006 (a near five-fold increase in five years) according to the CML. The chart below shows the change in the total number of mortgages outstanding since 1998 - as can be seen, most of the new mortgages that have been added since then have been buy-to-let (there are now 900,000 more buy-to-let mortgages, but there are only around 100,000 more non buy-to-let mortgages).
To put these figures in context, there are around 11 million mortgages in Britain, so the proportion of buy-to-let mortgages has risen from 1.7% to 7.7% in five years. This has, broadly speaking, been put down to two factors:
- The loss of confidence in traditional pension schemes, particularly since the 2000 dot-com bust and 50% fall in the value of the stock market.
- The large rises in both nominal and real-terms house prices since that time, and the associated media coverage.
The increase in the number of people buying second homes to rent out, as demonstrated by the increase in the number of buy-to-let mortgages outstanding, is nothing short of phenomenal. Given these figures, it would not be an exaggeration to say that Britain (or a large number of its residents, at least) is now a property-obsessed nation. The number of house-buying programmes on television is testament to that, and there are now enough to fill entire channels dedicated to property related programming.
