Many of us believe rely on using the value of our property to fund our retirement. If we downsize when we retire, we will be able to release enough funds to maintain our standard of living during retirement. Is this really true, though? Read this article and watch our video to find out.
If you look at how property prices have risen over the last 10 to fifteen years, it is easy to see that investing in bricks and mortar has made spectacular returns. If you consider how many years there are until you retire, then it seems safe to assume that property prices will just keep going upwards, like they have done previously.
Recent turmoil in the banking industry and the credit crunch have dented house prices severely since they reached their peak in 2007, however. We now realise that house prices can go down as well as up, which shakes our believe in relying on the value of our houses to release enough funds for our retirement.
House prices are still around 10% lower than their peak in 2007. Mortgages are still difficult to get as lenders require larger deposits and what is more, the housing market in the USA , which triggered the recent turmoil, is still very much in the doldrums. The American property market may takes years to recover. And so might ours.
So the outlook for property investments don’t look as rosy as they once did. Is a conventional pension a better long term bet?
The problem for pensions is that they generally invest in diverse portfolios which include stocks and shares. Stock markets have also been having a tough time over the last few years, although they have recovered some of the ground that they lost. However, pensions take a long term investment view and should generally perform well over a number of years, although this is by no means guaranteed.
Maybe the best option is to combine property investments with contributing to a traditional pension scheme.
The video below looks at just this scenario as property expert Sofie Allsop (sister of Kirstie Allsop, the Location, Location Location presenter) and pensions guru Paul Goodwin discuss the merits of property vs pensions for us.