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Sipps customers drawn to UK buy-to-let

29th April 2005 | back to article listings BACK    print this article PRINT

With less than a year until A-Day new reports are suggesting that the UK buy-to-let property market will draw the most activity from those with Self Invested Personal Pension (Sipps) hoping to invest new properties next year.

In a survey of Sipps customers carried out by AJ Bell 64 per cent of all respondents stated that they are likely to use their Sipps to buy properties after A-Day, either at home and abroad. The UK proved notably more popular an option, with 60 per cent asserting that they would opt for a UK property instead of investing overseas, despite recent trends showing overseas investments to be growing in popularity as lower prices abroad become more appealing.

Out of all non-UK destinations Spain and France were found to be the most popular for post A-Day investments, drawing nine per cent of all votes. This was followed by five per cent for other European destinations, save Portugal and Italy, which got three per cent, and Germany, which scored none.

In this, the vast majority, almost 85 per cent emphasise that they would use a portion of their Sipps to fund new property purchases.

Perhaps most significantly, the majority of those questioned agreed that they were most likely to opt for buy-to-let with their new investments, confirming a widespread propensity towards long-term property investment plans. The UK buy-to-let market has already seen strong signs of growth since 1999, having increased ten-fold over the period, and this growth is expected to continue apace. More than half of those surveyed actively favour buy-to-let, with 29 per cent looking to use Sipps to help fund a holiday home and 15 per cent aiming at a primary residence.

Demand for affordable housing has remained high throughout the UK, but rising prices in many areas, particularly in London and the south-east has led many would-be home owners to opt for part-ownership or renting. Subsequently, it is unsurprising that the buy-to-let sector has flourished, there being a healthy pool of potential tenants.

In addition, the buy-to-let market is also performing well against a slowing housing market, which is currently being affected by higher interest rates than in 1999 and slowing house price inflation.

Older Sipp holders may be more likely to use more of the pension to fund property investment, on the basis that they are eligible to contribute a higher percentage of their income to their Sipps (45 per cent for those over 60). It is unclear as to the extent to which these buyers have acted in the buy-to-let market in the past, though it is thought that the changes resulting from new pensions rules will attract new entrants to the market.

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