Buy-to-let market escapes credit crunch
Jan 22 2008 by Jez Davison, Evening Gazette
THE buy-to-let market has escaped the impact of the global credit crunch, according to a Newton Aycliffe investor who swapped her pension for property.
Angela Cook, branch manager at Pattinson’s Middlesbrough estate agency office, entered the buy-to-let market five years ago after deciding it would give a better return for her retirement.
She bought two three-bedroom properties in Newton Aycliffe for £100,000 each and had no problem in finding suitable tenants. She plans to invest in other properties in quiet residential and suburban areas, such as Acklam, although not until 2009.
New research from Investment Life & Pensions Moneyfacts has revealed that during 2007 the average pension fund posted growth of just 5.41% compared with an average growth of 9.17% in 2006 - their lowest returns for five years.
Ms Cook believes property could give a better return on investment, as long as investors take a long-term view.
She said: “This year is likely to be tough and we may see a dip in prices of about 5-6%.
“Before I entered the market, I did a lot of research dating back to the 1950s and found that, in general, every 10 years the market value doubled and then suffered a slight dip.”
According to the Association of Residential Letting Agents (ARLA), nine out of 10 landlords questioned during the final quarter of 2007 said they had no intention of selling their properties, with people instead planning to hold on to them for an average of nearly 17 years.
The survey revealed that fewer than one in 10 people think they will sell up within five years, and four out of 10 said they planned to increase their investment in bricks and mortar this year.
The ARLA survey also said 7.5% of respondents had bought a new property off-plan, but Ms Cook said: “You don’t know the demographic make-up of new estates until people have actually moved into the properties. Only then can you assess whether you should invest in the area.”
John Murphy, managing director of Alpha Independent Financial Planning in Middlesbrough, believes that other local investors are equally confident. “The buy-to-let market offers investment opportunities in places such as Middlesbrough town centre, which has a high student population,” he said.
He also advised private investors to consider putting together a balanced portfolio of pensions and property. “Each individual case needs to be treated separately,” he said, “although generally it would be wise to create a portfolio that contains different types of investment to minimise risk.”
GOVERNMENT officials are understood to be concerned that employers may only recruit staff who choose to opt out of the new personal accounts pension system, which requires employers to make a 3% financial contribution from 2010.
The manufacturers’ association, EEF, has urged the Government to provide powers to the Pensions Regulator to ensure potential employees are not discriminated against.
