Retirement funding becomes greater reason for buy-to-let

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Houses

A greater proportion of landlords are turning to the private rental sector to prepare their finances for retirement, according to a BM Solutions/ BDRC Continental survey.

Of those single property and portfolio landlords surveyed, 80% view their property as a supplementary income to their pension, with six out of 10 of these landlords actively planning to live off the rental income.

A further four in 10 intend to make a decision dependent on the state of the property market once they reach retirement.

Of the 38% of landlords who have previously looked at alternative retirement planning, such as fund investment, a third said they selected the buy-to-let market because they believe investing in property will produce a better return on their money.

Other reasons include providing an income, acting as a long term investment and offsetting against a poor pension performance.

Rental yields have increased to 6.7% this quarter, returning to a similar level seen in Q3 2011. In comparison, the average rental yield was 6.2% in Q2 2012, 6.2% in Q1 2012 and 5.9% in Q4 2011.

The proportion of landlords adding property to their portfolio in the last quarter has increased by 3% to 15%.

Meanwhile, the average number of properties being added has fallen back to the level seen in Q1 2012, from an average of 2.6 to 1.8.

Just over one in five landlords plan to purchase an additional property over the next 12 months.

“It is clearly evident that Britain’s love affair with bricks and mortar remains strong with many landlords looking at property investment as a supplement to their pension in retirement,” said Phil Rickards, head of sales at BM Solutions.

“Whilst landlords remain confident in the long term viability of the rental market; with the economic uncertainty in the UK and Europe, landlords are being more cautious and selective in expanding their portfolios.”

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