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How will the changes in the pension laws affect buy-to-let investors?

Next Auction - Wednesday 12th December 2018
Start Time - 09:00

How will the changes in the pension laws affect buy-to-let investors?

Written By Victoria Nicol | 30 March 2015

An overhaul of the pension system is underway and practically every aspect of saving for retirement has been the subject of scrutiny and change. One of the biggest reforms to go live in 2015 is the pension freedom reforms which will give people access to their entire pension pot from age 55 onwards, removing the need to buy an annuity to provide income until you die and giving access to invest-and-drawdown schemes previously restricted to wealthier savers.
These new freedoms over what you can do with your retirement pot promise a world of opportunity for the savvy saver and eagle-eyed investor, and if used wisely could help to supercharge your retirement finances. At Andrews & Robertson, we are already seeing a new ‘older generation’ of buy-to-let landlords coming to the market so is now the time for you to consider investing in property?
The rental market in the Capital has been strong for a few years now - of that there can be little doubt. More often, those relocating to the Capital for work are biding their time before purchasing their own property and corporate lettings are rising. Many simply find the convenience of renting a home more appealing. The slowing down of the sales market in recent months, coupled with a drop in supply of new stock to let, is ensuring the rental outlook for landlords is positive with strong rental prices and yields around an impressive six percent. Indeed, we are seeing a number of existing buy-to-let landlords looking to increase their portfolios in 2015, and with interest in the sector holding strong, it's easy to see why this would be the case. 
For those who have cash, or can raise adequate funding, auction continues to be a popular way of buying investment property. To illustrate our point, let us consider two recent examples that went under the gavel in our own auction room. The first, a three bedroom ground floor flat on Shenley Road in Camberwell SE5, sold in July 2014 for £300,000. With its fast connections into the City, its local arts scene, and plethora of bars and restaurants, rental prices in this vibrant area of central London are quickly rising - as are those of its neighbours Denmark Hill, Kennington and Peckham. Located just a stone’s throw from The Groves which offer some of London’s best Georgian properties, Shenley Road’s estimated rental value of £1,700 per month would generate an impressive yield of 6.8%, making it a great investment for any would-be landlord taking the plunge.
Indeed, South London increasingly holds appeal for investors offering good returns without the high price tags that come attached to property north of the River. Since the arrival of the over ground to Crystal Palace, property prices have risen dramatically. The nonstop journey from Crystal Palace to Shoreditch delivers commuters to the City in just under half an hour, while Canary Wharf can be reached in under 25 minutes. Its village atmosphere, green spaces and good schools makes SE19 a popular choice for families and young professionals alike. The housing stock is a mix of period and new build flats, which appeal to first-time buyers, while growing families find it more affordable than other south London areas like nearby Dulwich. We recently sold a two bedroom, split level maisonette on Jasper Road, close to Crystal Palace Park, for £404,000. Looking at the figures this would make a sound investment with an estimated rental value of £1,400 per month, this property would return a healthy yield of 4.2%.
For those looking further afield, equally good returns on investment can be achieved in the commuter belt counties of Surrey and Hampshire. A two bedroom flat in Dorking, Surrey, which sold recently for £122,000 could provide the prospective landlord with an impressive 10.8% yield whilst a studio flat in Romsey, Hampshire, more than made up for its lack of square footage with its sizeable 8.7% potential yield.
If these examples of canny investment have whet your appetite then do heed a few words of advice before dashing to the auction room. Take time to view the property you are interested in. Research the local area and speak to estate agents so you know the rental values you could reasonably expect to achieve. Read the legal packs and ensure you have financial arrangements in place to pay your deposit on auction day (with access to the remaining balance within 28 days). Set yourself a bidding limit - the auction room is not for the faint-hearted. Remember, a rash property decision could come with an equally big price tag and sadly, it’s not quite like eBay – a moment of over-enthusiastic bidding could end you up with more than just a sofa that won’t fit through your front door!

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