Is BTL better than stocks and shares for retirement?

According to new research from Nationwide Building Society, the average cost of a typical home in the UK in April 1991 was £53,677.

Prices have increased by almost 260% over the past 24 years, bringing the average UK house price in 2015 to £193,048.
It’s no surprise that the buy-to-let market is booming in the UK, as more and more investors opt for property, rather than stocks and shares to fund their retirement.  More than two million people are now private landlords, up by 600,000 since the financial crash.

In 2000, less than 2% of mortgages in Britain were buy-to-let. Now there are 900 BTL mortgages available accounting for 15% of all home loans and new buy-to-let mortgages account for 18% of new mortgages.

Over the last 15 years, property has given investors excellent returns. The chart below shows how much money would have grown if it had been invested in property since 1991, the year Nationwide started publishing monthly house price figures, and in the FTSE All-Share index over the same period. Returns from the FTSE All-Share only narrowly beat those from property, at 264% compared with 259%.

Jane Morris, Managing Director of Property Let By Us comments: “Our own research shows that for 20% of landlords, their property portfolio forms part of their pension provision and for 70% of younger landlords, it is their only pension fund.  

Many people still prefer property as a sensible way of saving for the future because, unlike pensions, with bricks and mortar your money isn't locked away until you reach the age of 55.  Excellent rental yields and capital growth from buy-to-let is appealing to any investor who is concerned about the volatility of the stock market.  

 

Despite the additional costs in property such as buying fees, maintenance and void periods, the asset growth and rental income is still very attractive for investors concerned about the volatility of stock markets. However, as with any investment, there are no guarantees, so investors should be aware of the potential pitfalls.”