A major survey of 1,500 adults shows that a quarter plan to downsize their home in retirement, with many others suggesting that buy to let would help pay for later life.
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, warns that landlords and owner occupiers alike should not be seduced by rising property prices.
“It’s more complicated than first thought and people should think carefully before putting all their eggs in one basket and deciding to fund their retirement through property rather than a pension” cautions Morrissey.
“Those looking to fund retirement through buy-to-let … need to take account of other costs before taking the plunge.
“You will pay higher rates of stamp duty on a second property and you will need to factor ongoing costs such as maintenance fees and covering the rent during periods when it is unoccupied.
“If you are thinking of selling the property, then you will need to factor in capital gains tax as well. This currently sits at 18 per cent if you are a basic rate taxpayer and 28 per cent if you pay higher rate tax on gains above £12,300.
“The recent Autumn Budget slashed this threshold down to £6,000 from next April and £3,000 the following year so you could be landed with some nasty tax bills.”
Morrissey adds that those wanting to downsize to fund retirement may have trouble selling in the current housing market
She adds: “According to our data 16 per cent of people said they wouldn’t make enough from downsizing to make it worthwhile, and we could see this figure rise in the coming year.
“The costs associated with moving is another key factor with more than a fifth of people saying a move would be too expensive while more than a third admitted they were too attached to their home to consider a move – the desire to downsize wanes as people get older so it’s important not to rely on having to do this to fund retirement.”
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I am selling up and will invest elsewhere, the CGT drop is a double edged sword, it means there is little point in selling one a year…. So all the tenants can be evicted at once !!
I agree, but will stay in longer if property prices tumble too far.
Hopefully in next few years I will have sold enough to be mortgage free on the others.
For me less outgoings is the way forward, just need to navigate slowly.
I am keeping properties where I have long standing tenants whom I have a very good relationship with, though rents will need to go up to cover my costs thanks to section 24 until I can reduce the mortgages.
Agreed Andy debt free is the way to go now, cash is king again
As outlined below, I'm considering moving in this direction if our £20k interest costs rise near to the £60k gross rental income generated from our mortgaged properties.
This would put about a dozen tenants on the street.
Put it in the bank , you’ll get the financial haircut where they basically steal your hard earned money to pay off their bankster pals antics
All part of the long term plan ..
They want everyone paupers so they can control us … aspirational intelligent people are their enemy
There still seem to be too many older people rattling round in larger houses where they don't use several rooms, so not heating them and just getting cold and damp. You see these properties come onto the market once they have gone into a home or died. Surely it makes sense to move to a smaller more energy efficient property? I do realise it can be very hard to persuade elderly parents to do anything sensible. The cost of moving is small compared to the funds that could be freed up and the future savings on utility bills.
Good point, the Council's should also encourage elderly residents that live on their own to downsize.
Still to many one or 2 families in 3 bed houses which were intended for families.
My wife and I have two such homes but are dissuaded from selling our main home due to crazy stamp duty costs and our second home due to punitive CGT rates.
Yet another two barriers to solving the shortage of homes which could be easily removed by a sensible Government, so not going to happen any time soon.
In the meantime we can afford to keep both homes properly heated and maintained and enjoy continued capital growth, albeit perhaps stalled temporarily.
We've lived through too many property price cycles to be worried about another one.
Well an outfit that sells private pensions would say that wouldn't they
We still have around £1 million of mortgages on our portfolio, costing around £20k in interest and grossing around £60k rental.
However if the interest rate increases to approach the £60k and capital growth stalls then it would no longer make sense to keep all the mortgaged properties which would put a dozen or so tenants out on the street, especially whilst the SNP rent freeze stays in place.
It would appear that our loan amount is similar, though as selling one property will go down to £900,000.
Your interest payments are far better than me, unfortunately unable to fix my rates earlier in the year as rents were too low. When I raised the rents so interest rates rose and again I could not fix.
Hence my preference to sell some properties.
In order to plan for the future I am able to offset some of my tax into a SIPP. I can do this as have a part time job, work around 6 days a month. In this way I can offset some of the effects of section 24.
I can’t imagine having a million quid mortgage round my neck , you’re a better man than me my friends 🌞
I can only wish all you decent hard working people best of luck in the future with such a corrupt incompetent political class in charge of things
Neither can I George, however to those with low gearing I don't suppose it's a problem
My gearing overall is under 25%, with most fixed last year at between 1.69% to 1.99% for 5 years so I am quite relaxed currently.
I've never had repayment mortgages for around 30 years and have seen my gearing fall from around 90% to around 25%, courtesy of capital growth and occasional modest repayments to get below a threshold for better rates.
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