Property over pensions: Why younger people are choosing bricks and mortar

Data from the buy-to-let mortgage broker shows that two age demographics; those aged 20-29 years old and those aged 30-39 years old, have been the only ones to record continued year-on-year market share growth for buy to let purchase applications since 2015.

Which begs the question, why?

Has there been a change in attitude among younger people who now perceive investment in bricks and mortar as a better longer-term opportunity than pensions?

Conversely, since 2015, there has been a decline in the proportion of applications from people aged 60 or over.

Andrew Turner, chief executive at Commercial Trust Limited, had this to say: “The figures suggest that younger people can see the value in investing in bricks and mortar – and perhaps this is an indicator that they perceive property investment as a sounder investment than pensions in the longer term.

What is also interesting from these statistics is that rather than seeing an increase in buy to let applications from people reaching retirement age, we have seen a fall in market share from 2015 to 2017. Much was made of the April 2015 changes to pensions, commonly referred to as Pension Freedoms.

Under the old rules, people with a defined contribution were allowed to take up to 25% of their investment as a tax free lump sum and were compelled to purchase annuities with the remaining 75%.

However, Pension Freedoms allowed people to use their entire fund as they wished, with speculation that this would lead to a surge in the number of buy to let investments from retirees, looking to receive rental income and potentially capital growth, to fund their retirement.

Whilst Commercial Trust saw an initial burst of application activity from the over 60s in 2015, this has not been sustained through the two subsequent calendar years. Since 2015, the market share for this demographic has fallen from 25% to 18.8% for 2017.

The biggest market share continues to come from those aged 40-49 years old, with three years of consistent application activity, which consistently accounts for just under a third of all purchase applications and has seen just a 0.8% fluctuation over the past three full years.”