From Russian oligarchs to greedy landlords or slow house builders, there have been plenty of property market villains blamed for pushing up house prices.
But now that there are concerns of prices hitting a peak, particularly in London, who should take the fall?
Plenty of commentators have attributed the slowdown to the Brexit debate and curbs on buy-to-let taxation, but Lee Goggin from financial adviser search tool Findawealthmanager.com says some of the blame may rest with government efforts to make everyone save into a pension.
Since 2012 companies have been enrolling staff into pensions and that could mean money that was previously put away to save for a mortgage deposit is now being put into retirement savings.
He explains: “Six million people have now been auto-enrolled into a workplace pension scheme and more are joining each month as the programme is rolled out across the country and smaller employers are required to join.
“The scheme will eventually ensure that employers contribute 4% to a pension – but also encourages employees to contribute 3%. Many suggest this should be much more. Labour is recommending that people should save 15% of their salaries into pensions.
“If people saved what they really should be saving for retirement – reducing the amount they can afford to pay on a mortgage – it could bring house prices down by as much as 35% over time. Even if the move to sensible pension saving is only gradual, that is gently increasing the squeeze on house prices.”
EYE asked financial adviser Patrick Connolly, of Chase de Vere, if a pension or property is the best bet.
He said: “From an investment perspective, for most people a pension is a far more sensible choice than investing in residential property.
“Investing in a pension is more affordable, doesn’t involve taking on debt, provides more diversification and is more tax efficient than investing in property.
“Most people should look to start saving into a pension as early as possible, ideally through a company pension scheme, and then save as much as possible until they retire.
“However, the situation is different for those trying to get on the housing ladder. These people don’t usually consider property to be an investment. Instead they think of it as an aspirational lifestyle choice.
“This is absolutely understandable, although it does mean that for some people saving enough to get on the housing ladder while also investing enough into a pension can be a real challenge, and compromises often have to be made.”
Comments (10)
So i get 40% tax relief on my contributions, so i put in and get credited £100 and it costs me £60.
It grows virtually tax free. and i can move it from fund to fund to cater for differing market conditions.
The fund manager charges me 1% not 9% management fees and when i take it i can regulate the income to suit my tax status at that time.
If you invest in property just look at the charges and taxes on exit as well as the potential of increasing rates which some of you guys may remember went as high as 15% back in 1990.
Regular investing also takes advantage of pound cost averaging
I now have close to 1 mill in a fund and only ever put in a max of 200pm, just start early.
Rule of thumb is for every 5 years you delay you will need to double the contribution to get the same income
You can also boil it down to basics.
To get a comfortable pension at retirement you need to put between £400 – £500 pcm away. The average person cannot afford this.
If you buy a property to let, the tenant can service the mortgage, you get the equity growth in the property over the next 20 odd years.
Come to retirement you will hopefully have paid off the mortgage, and then have an income from the property. Your asset will also increase in value so at some point you can sell and have a nice big nest egg to either invest or enjoy.
If you have £400- 500 pounds spare why on earth would you buy a 1% net yield that you can’t access till you’re 55 and then only 25% without penalty and that dies with you?
£4800 buys an extra £160,000 of property equity that is going to capital appreciate at 6.9% average and yield a minimum 5%. It costs you stamp duty and professional fees to get in, a few quid to get out, you are buying an asset that is inheritable and one protected from corporate mismanagement. Being prudent I have been a pension saver since 21, my invested pensions have been pillaged to the extent where there are unlikely to cover the running of a car.
Distrust in the Govt raiding pensions and altering pension age even for a private held pension. Control over your own investment in a property, ability to pass it down to your children, capital increase.
A pension – no control, must by an annuity, no capital value or increase, limited in passing on to a spouse but not children, open to be altered and stolen by the govt. Has done worse then property for growth.
Guess where my money is. Plus no agents fees for me !! yippee 🙂
To Mr Goggin: well you would wouldn’t you ! When one invests in property, the ‘wealth manager’ has no input into that decision, no advice to give, no fees to gain, and no ongoing relationship off which to earn further fees – let’s face it, stats show that property investment has trumped every other investment over the long term. Talking your own book maybe? Of course, what goes up in value may also go down and so-called experts have predicted nineteen out of the last 5 property crashes, but remind me, Mr Goggin, for how many years has the FTSE been around or below its current level?
Robert, you sound just like the people who slate estate agents, suggesting we’re just ripping everyone off. The answer is to now do your own pension investing using a SIPP if you feel your pension provider wasn’t doing a good job. There is a good case for both pensions and property which is why I do both. Both will go up and down and both have their dangers. The story just highlights the fact that people are being forced to put some of their money into to a pension, so therefore it hinders them saving for property too. Or it could mean they buy Tesco basic baked beans, but a few less pints down the pub each week, haggle a bit more off their agents fees, or (God forbid) use a cheaper online agent !!
I have been observing Financial services since 1986 watching what is going on and making my own decisions based on what I was seeing.
My professional invested pension plan has managed whopping 16% net return since 2005 when I decided to SIPP mirror what they were doing; with a couple of strategic tax fee withdrawals as a Brucey Bonus the mirror fund has achieved over 233%. City investors are essentially Foxes with a VIP pass to the hen house
The whole pension & investment system was broken by Gordon Brown and effectively we have been warned off investment through third parties or even putting too much cash into banks.
Pension plans have attacked by Government over the years. They are no longer attractive and lets fast forward 20 years and George Osbounre Junior will come along from his privately educated school and say “WOW MORE MONEY WE CAN TAX OR DIP INTO”!!!!! I think the trust has gone.
He’s avin a laugh! the reason those that can are investing in property rather than pension plans is because they private investors are (were until George Osborne decided to stop them) in control of their investment and the annual charges on their investment.
I had a great pension plan which was doing very nicely and what had been consistent 7% growth suddenly became 2% when the plan got flogged to the Prudential. With a 1% fee slapped on for managing the plan I effectively was paying a 50% fee to people doing a rubbish job of managing my pension.
When there is honesty and transparency in pensions, investors are far better off sorting out their own affairs if they are able to ,otherwise what you find is that pension plans are investing in property, taking the 7-10% yields and then passing on just 2% to investors of which they take 1% in fees.
The traditional ‘we’ll get very rich but pay you a pittance’ pension providers really do need to wake up to the modern investor who was told very clearly in August 2005 by Gordon Brown, that property was the pension of the future.
Well put Robert.