A-Day expectations to boost buy-to-let market |
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Sat, 24 Sep 2005 16:05
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LONDON: The currently sluggish property market may receive a nudge from an unexpected quarter – buy-to-let investors and people planning their retirement, according to industry analysts. There will be a significant rise in property investments post A-Day when the new pension legislations will be announced.
Wealthy individuals and older people are certain to take advantage of the new pension policy using the Self-Invested Personal Pension (SIPP) investment plan which is considered a very good retirement plan.
Most people over 45 disregard the current slump in the property market and are confident that it will recover. Some are even taking advantage of the drop in prices in certain areas which has seen sales turnaround. The competitive mortgages and the Bank of England’s decision last month to cut base rate by a quarter points have also helped to some extent.
The SIPP plan gives a person many options in which to invest his retirement fund: bonds, cash, stocks, shares and now residential property. Analysts are certain the A-Day announcement would cause a surge in property investment and would benefit many who earlier wished to invest in property but were unable to do so.
The investor also gets tax relief on his/her contributions toward the pension plan. One can contribute up to £215,000 or his/her entire salary, whichever is the lower, to a pension plan. One will also be able to draw one fourth of the pension fund as a tax-free sum.
The government is expected to replace the current eight sets of rules with one plan covering every type of pension plan.
The new interest in the buy-to-let market could increase the value of homes significantly, according to property advisors.
Some investment companies plan to take the opportunity ahead of A-Day and launch schemes that will allow investors to put residential property in their SIPPs. City Living, for instance, has already taken the lead and announced its scheme where one can invest in a fund dedicated to buy-to-let residential properties. Minimum required investment is only £20,000 - but the investor gets property exposure of upto £40,000.
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