It may be nothing new, but after significant changes to the pension system last month, many property and finance experts are predicting a surge in the number of ‘silver landlords’ entering the Private Rented Sector (PRS).
The term silver landlord may be unfamiliar to some agents. Essentially, it’s the phrase being used by the media to refer to those reaching retirement who opt to invest their pension pots in Buy-to-Let property.
On April 6 large-scale reforms of the pension system came into action, meaning that retirees no longer have to convert their pension pots to annuities and they can now withdraw all or part of their pension if they wish.
Unsurprisingly, many of these aforementioned UK residents will be using their new-found pension access to invest in property (as many as 200,000, according to investment firm Hargreaves Lansdown). The most recent English Housing Survey reported that 1 in 3 people aged 45 to 64 with a pension would consider using some or all of it to fund a Buy-to-Let property. Of those interested in Buy-to-Let, 43% said it was due to the prospect of a regular income. A further 23% said it was because of the perceived security of the investment and 17% said it was in anticipation of the expected capital appreciation.
The interest in property among this demographic is hardly surprising when you consider the returns of property investment in comparison to other asset classes. A recent report published by peer-to-peer lender Landbay found that Buy-to-Let landlords have seen a typical compound annual return on their money of 16% since 1996. The analysis shows that every £1,000 invested in an average Buy-to-Let property in the final quarter of 1996 would have been worth £14,897 by the final quarter of 2014. This equates to a significantly greater return than any other major asset class, the study suggests.
Moreover, it has been regularly reported that the number of UK landlords is increasing year-on-year. There are now an estimated two million private landlords in the UK, renting out around 5 million homes, the equivalent of approximately one in five homes across the country.
For the modern landlord there is a raft of things to think about, be it tenancy agreements, Section 21 Notices, landlord insurance or tenant referencing. The vast majority of landlords – new or existing - will need a good letting agent to advise and manage part if not all of the rental process. Pension reforms have provided letting agents with the opportunity to target a specific and potentially profitable demographic.
As well as higher numbers of landlords, there are also undoubtedly more estate and letting agents in an increasingly crowded marketplace. For example, an online estate agent recently reported that there are currently more than 2,600 estate agents found in the capital alone.
With this increased competition, agents need to think carefully about their marketing strategy for targeting the so-called silver landlord. Are you offering your top tips for new landlords or are you putting out content that informs landlords of their ever-growing list of responsibilities? Does your marketing strategy take into account where potential silver landlords can be found both online and offline?
Although the ultimate impact of last month’s pension reforms on the Buy-to-Let sector will not become clear for a while, the opportunity they have provided for agents to take on new clients remains undoubted.