Property investment as a retirement plan more popular than ever


A growing number of people who are approaching retirement age are using property investment as a nest egg. Why is UK housing seen as such a safe investment?

There has been a major spike in the number of buy-to-let property purchases in the 60-64 age bracket, according to a recent report from Paragon Bank. Property investment in the age group grew by 52% between June 2020 and June 2021, which is more than in any other age demographic.

This increase in housing acquisition for people nearing retirement age is a clear indicator of the confidence still felt in the UK housing market. At present, with savings rates at historic lows and stock markets notoriously volatile, well-advised property investment is an asset that can reap the best rewards for owners.

However, young buy-to-let landlords are still keen to invest, says the report. In fact, despite the rise in older investors, the majority of buy-to-let owners are in the 35-50 age bracket.

Property investment post-pandemic

One of the big reasons behind the growing number of older landlords could be a rise in people taking early retirement or redundancy, says Richard Rowntree, managing director at Paragon Bank. With some industries more heavily affected by the pandemic, there could be more people choosing to use property to boost their pension pot to replace a previous income.

Rowntree adds: “Or they are simply experienced landlords who took advantage of the stamp duty holiday to lower their purchasing costs. Of course, sadly, inheritance can also result in a one-off cash boost.”

“While there was a sharp increase in older landlords purchasing new homes, it was also encouraging to see the majority of purchases in terms of absolute numbers being made by those aged between 35 and 50. This suggests that there’s a strong pipeline of younger landlords growing portfolios.”

Borrowing options for older landlords

While younger investors will have more mortgage options available to them, later life mortgage products are expanding. At Paragon Bank, the maximum age limit is 85, meaning buyers aged 60-64 still have around 20 years to pay off any loans.

Borrowers have a higher chance of being accepted by lenders if they have a good credit history. Higher incomes are of course another bonus when taking out a mortgage. Lenders tend to see older borrowers as a riskier option, so buyers must be able to prove their ability to pay off their mortgage.

Other options include lifetime or equity release mortgages. This is where you free up money in an existing property which you can then spend. You pay the mortgage off when you die or move into a care home with the sale of the property.

Benefits of UK property investment

For many investors, the UK property market continues to be seen as a secure place to keep your money. Especially as savings rates remain low, the yields as well as capital growth you can achieve from bricks and mortar are very attractive.

Aside from any monthly and regional fluctuations, house prices in the UK have only gone up over the past 10 years. The rental market in the UK is also strong, and people are now renting for longer before buying. High tenant numbers mean strong demand, resulting in good yields across the country but particularly in certain locations.

In terms of annual price change, London has achieved the slowest value rise. Areas such as the north-west, the north-east and the midlands have all seen more dramatic house price increases in recent years. As the government continues to focus on “levelling up“, and more focus is placed on areas away from the capital, this trend is likely to continue. Northern and midlands cities are also more affordable, meaning investors can have a much lower starting point to achieve a successful property investment.

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Property investment as a retirement plan more popular than ever


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