Property industry gears up for A-Day
Assetz has seen a 30% increase in enquiries regarding its residential property funds during the last two weeks.
Although direct investment in residential property such as buy to let apartments and holiday homes has been forbidden, the chancellor remains committed to allowing investments within an investor’s pension savings plan, provided this is done on the genuinely diverse basis through syndicates and property funds.
In addition, direct investment is permitted in student Halls of Residence and certain types of hotel room investments, both in the UK and abroad.
Stuart Law, managing director of Assetz commented:
“The simplification of the pension system after A-Day has definitely encouraged people to start making provisions for their retirement by generally raising the profile of retirement planning and making it more attractive to people by widening the choice of investments.
“The Government has recognised that property is a more appropriate pension asset than it has been given credit for in the past. Almost all investment properties would generate higher net yields than a FTSE 100 company with average dividends of around 3%.”
Assetz predicts that IFAs will begin to reassess the percentage of an investors portfolio that should be made up of property in light of customer demand for the asset class, historic performance and a greater awareness of how property can be used as a more structured investment component than previously understood.
Stuart Law continued: “Bearing in mind that property can generate reasonable to high income plus capital growth on top, a sensible proportion of net assets invested in appropriate property within a pension for a person of average wealth in their twenties or thirties should be in the region of 20 – 30%. Someone under the age of 40 who is skilled and experienced at property investment, and with a reasonable income/ net worth could opt to have as much as 50% in property, alongside more traditional pension planning.”
The residential syndicates proposed could be able to borrow up to 85% of the value of the property, as the SIPP would own a share in the syndicate but the syndicate itself would borrow, enabling investors to better the SIPP lending limitations of 33% of the value of the property. This opportunity will be extremely popular with investors who understand the benefits as well as the risks of gearing.
The Assetz Property Funds are designed to be tax-free for SIPP or SSAS pension fund investment purposes, allowing investment from just £5,000 and utilising gearing (bank lending) that is comparable to that used by professional property investors. This leads to higher potential returns, albeit with the corresponding increase in risk.