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SIPPS - £6.5bn estimated property investment growth

16th August 2005 | back to article listings BACK    print this article PRINT

Research carried out on behalf of the Property Investors' Show has estimated that more than £6.5 billion is likely to be invested in property during the first year of next April's Self Invested Personal Pension (SIPPs) plan changes.

From 5th April 2006, investors will be able to use their pension funds to buy residential property in the UK and overseas, with a massive number of expected to take advantage of the SIPPs plans.

The Property Investors Show survey of 200 property experts reports that of the £6.5 billion, £1.75 billion is expected to displace existing pension investments – mostly equities – and £4.75 billion will be extra growth, increasing the UK annual private pension contribution of approximately £70 billion by seven per cent.

The plan will permit investors to place up to £215,000 in a SIPPs investment in residential or commercial property. As such, SIPPs investors will be able to make substantial savings on property purchases, with the government making up the shortfall.

A survey conducted by independent financial advisor Hargreaves Lansdown has found that 37 per cent of current SIPP investors are keen to use their pensions to finance new properties. This could mean 52,000 extra pension property transactions, each at an estimated average value of £195,000.

Justin Jordan, Director of financial management company Astute, reports an increase in activity already. "Many of our clients are already making moves to restructure their pension funds in order to buy property after the change over."

"It is even possible to buy off-plan property now and then make the full purchase as soon as the regulations come into force next year. This is going to pump literally billions of pounds into the property market - the take up is going to be massive," he added.

Nick Clark, managing director of the Property Investor show predicted that the property investment growth will not be limited to the UK market: "the ability to invest a pension in overseas property is going to encourage many people to take advantage of some of the countries where property prices are still seeing rapid growth".

Mr Clark said that the property market, already one of Britain's most popular investments, will only grow under the increased flexibility plan. Additionally, with the flexibility to gear properties in a SIPP, investors will have more opportunities to maximise their returns, Mr Clark added.

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