Bank of England Chief Economist : “Property is better than Pensions” (and our view on property investment in Manchester as an alternative)
A couple of weeks ago, the Bank of England’s chief economist Andy Haldane claimed that property is a better investment for retirement than a pension.
Haldane believes that property investment is a better bet for retirement planning than a pension. “It ought to be pension but it’s almost certainly property,” he told one newspaper.
However, former pensions minister Ros Altmann mentioned that Mr. Haldane’s views were “divorced from reality” and it was “irresponsible” to suggest people should rely on property rather than pensions.
Haldane has admitted to the media that he is moderately financially literate and has admitted that pensions to him at times seem relatively confusing.
Other commentators in the financial sector also disagree with Haldane’s recent comments. Many have pointed out that Mr Haldane earns a basic salary of more than £180,000 a year, and it is believed that his accumulated pension pot that will pay him £84,000 a year when he retires from having a long tenure with the Bank of England.
In contrast, wealth manager company Charles Stanley stressed that many people underestimate how income can be made from a household.
For example, if a property is worth £500,000 and the owner(s) downsizes to a £250,000 property, they can release £250,000 that can go towards their retirement.
Mr Haldane is not alone when he admits he struggles with Britain’s “complicated” pensions system, we believe that as well as having a pension, investment is also key.
Property Investment in the North West
We are a passionate bunch here at The House Crowd, especially when it comes to investing in our beloved North West.
Unlike the confusion about the country’s pension system, when it comes to investing in geographical areas of the UK, the north west remains robust despite the recent Bexit vote.
Commercial property consultancy firm Lambert Smith Hampton’s quarterly UK Investment Transactions shows that despite expectations that investment activity would drastically slow down in Q2 in the run up to the referendum, there was a 42 per cent uplift to £501m compared with the same period in the previous year of £353m. (MEN, September, 2016).
In addition, their research reveals that investors have now turned their attention to defensive assets to counter the volatility in the current market.
Moreover, the level of economic uncertainty still looms, however due to recent low interest rates and an attractive exchange rate means that investors are hungry to invest into a very appetising region.
It’s not only domestic investors that have been drawn to the Northern Powerhouse city. Last month research indicated that Manchester has one of the highest proportions of foreign property investors in the UK, while the city has also been recently described as a ‘magnet for investors’ post-Brexit.
During these uncertain times, we’ve heard many say post-Brexit, that they don’t want to take the risk profile that they did beforehand and that’s why they have looked to the north for an alternative, many have also looked at specialist property due to the fact it tends to be less risky and slightly more defensive.
The likes of student housing, hotels and health centres had become “more institutional, liquid sectors” due to their less cyclical nature and long leases as mentioned by Mike Sales, head of TH Real Estate in a recent Reuters article on UK property post-Brexit.
To sum it up, whether you agree or disagree with the Bank of England’s chief economist views on property investment is better than a pension or not, one thing is clear that an alternative is needed, the likes of property crowdfunding can be used a vehicle for obtaining relatively good returns with property yields in the north west at around 6-7%.
In addition, as Mr. Haldane put it in a recent article : “As long as we continue not to build anything like as many houses in this country as we need to meet demand, we will see what we’ve had for the better part of a generation, which is house prices relentlessly heading north.”
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