Property investment, and particularly the buy to let sector, received a great boost recently when new data released from Commercial Trust (a well respected buy to let mortgage broker) showed that those in the younger age bracket had a preference for investing in property rather than investing in a pension.
The data from Commercial Trust focused on two age demographics which were 10 years to 29 years and 30 years to 39 years. The numbers showed that these two demographics were alone in contributing to the growth of buy to let purchase applications since the year 2015.
Decline in Buy To Let Mortgage Applications from Older People
Since the same year of 2015 the proportion of buy to let mortgage applications has declined from people that are 60 years old or more. The chief executive of Commercial Trust said that the figures indicated that the younger generation saw more value in property investment.
He went on to say that this could be indicative of younger people perceiving that investing in property was a more sound investment than investing in pensions over the long term. The other interesting thing from these numbers is that rather than an increase in buy to let mortgage applications coming in from those at the age of retirement there has actually been a fall from 2015 to 2017.
Back in 2014/2015 then was a great deal of publicity around what a lot of people were calling “Pension Freedoms”. If a person had a defined contribution they were entitled to take out up to 25% of their pension investment as a lump sum tax free. They then had to obtain annuities for the 75% that remained.
The belief was that Pension Freedoms enabled individuals to manage their pension fund exactly how they wanted to. This lead to speculation that a surge of property investments in the buy to let market would occur from retired people. They would go down this route because of the potential capital growth and the appealing income from renting.
This was true to an extent and in 2015 there was an initial increase in the number of buy to let mortgage applications from people that had retired. But this did not last long and certainly has not been sustained over the last two years.
In fact the market share for retirees making buy to let mortgage applications has decreased from 25% to 18.8% at the end of 2017. The reason for this is not abundantly clear but it could be due to the recent government tax changes and stamp duty hikes.
Younger People continue to dominate Market Share
It is probably no surprise to learn that the 40 years to 49 years age bracket provides the largest market share for buy to let mortgage applications. This has been the case for the last three years.
The age range actually accounts for over 33% of all applications. There has only been a minimal 0.8% fluctuation in years 2014 – 2017 and the signs are that this will be the case in 2018.