Speculation of a flood of buy-to-let investment once the new radical pension changes are implemented in April have been overstated as pension pots are too small, the Council of Mortgage Lenders said in response to new research.
Research published today by the Bank of Ireland indicated that retirees are set to enter the property investment market following implementation of the pension changes in April.
The chancellor’s stamp duty changes have also driven up interest in buy-to-let with Bank of Ireland figures suggesting 21 per cent of property owners are now more likely to invest.
The data showed almost half of British homeowners who are not yet buy-to-let landlords want to become one.
Some 41 per cent of pensioners were planning to take a lump sum to buy a property or to pay off their mortgage on retirement, the data also found.
Sue Anderson, CML’s head of member and external relations, told FTAdviser that this potential trend is likely to be overstated, as the majority of pension pots are likely to be too small to make significant property investment, while many may be put off by the risks involved.
Meanwhile despite the surge in popularity, the bank’s survey of 400 British property owners, found that half of landlords do not fully understand the income tax implications of their buy-to-let property.
This is also true for more than a third of ‘accidental’ buy-to-let landlords, who do not understand the inheritance tax implications of properties bequeathed to them.
Bank of Ireland UK, through its partner the Post Office, is a provider of buy-to-let mortgages.
Mark Howell, commercial director at Bank of Ireland UK Mortgages, said that a knowledge gap around the tax implications of buy-to let continues to exist.
“It is interesting to see that this is particularly profound with regards to inheritance tax; a situation many accidental landlords find themselves in after inheriting a property.
“We’ve seen over the past few waves how influential government announcements can be on investors’ ambitions for property; with stamp duty changes drastically improving confidence and likelihood of investment in buy-to-let property and pensions annuity changes empowering retirees to take lump sums to buy property to fund their later life.”
Earlier today (10 February) data from Moneyfacts revealed that the average buy-to-let borrowing is currently at the lowest level ever recorded - just 3.82 per cent across all terms - while the number of deals in the sector has risen from 757 to 811 over one month.
Meanwhile, yesterday lettings agent Ludlow Thompson stated that the total number of buy-to-let investors in the UK has risen 8 per cent in the last year to 1.63m - with the net income of these investors reaching £13.1bn in 2012 to 2013.
peter.walker@ft.com
