Sales of buy-to-let properties continue to be driven by pension “pot hunters”, according to the latest findings from Sequre Property Investment.
Sequre’s research has found that, compared to its original findings in 2015, the market remains relatively unchanged despite recent government intervention – including changes to mortgage interest tax relief and the extra 3% stamp duty surcharge on second homes – which has aimed to make buy-to-let a less attractive proposition.
Investors looking for pension returns clearly dominate the market, Sequere’s research shows. To try and understand the main motivations for investing in buy-to-let property, Sequere has defined four distinct categories of investor: namely The Pot Hunters, The Warriors, The Protectors and The Chieftains.
Nearly half (48%) of buy-to-let purchases were driven by the desire to supplement income for retirement, up by 2% from 2015. Buy-to-let property is now seen as a safer bet than pensions for many when it comes to returns and future income, which has seen the number of Pot Hunters rise in recent years.
Young professionals are also getting in on the buy-to-let boom, with 15% of investors aged 21-30 opting to purchase buy-to-let property as the best investment product to suit their needs, up from 13% two years ago. Younger investors – or The Warriors - are turning to more affordable areas to take their first step on the property ladder, opting for property investment over home ownership to maximise their returns.
A further 13% of investors who were surveyed identified themselves as The Protectors – primarily investing in buy-to-let for the benefit of their children and loved ones. The Protectors believe property investment is the best way to support their family, either using rental returns to hand over a lump sum to their children when required or physically passing on a tangible, income-generating asset to their offspring in years to come.
Lastly, there are The Chieftains – those who are eager to build a property empire. Some 20% of Sequre’s buy-to-let investors are aiming to make their millions through property, and are looking to join the ranks of the property millionaires by establishing and expanding their portfolios. The ultimate dream for these investors is to become hands-off landlords, something that can be achieved by splitting capital and spreading it across several properties in order to achieve higher overall returns.
This approach, Sequre says, also gives investors the ability to build a strong, solid and long-term portfolio while generating a good secondary income at the same time.
“Each person’s motivation for investing in buy to let can vary, and in many cases, there is a primary motivation followed by several others,” Graham Davidson, managing director of Sequre Property Investment, said.
“Investing in property not only provides great returns when the deal is right, but it’s also a tangible asset that can be held for capital growth or sold for the profit.”
He added: “Ultimately, our research shows that motivation is often driven from one of four main ‘tribes’. With pensions and income for retirement being such a huge focus back in 2015, this momentum has clearly stuck with a large majority of individuals and buy to let is still providing the best returns over annuities and many other investment types.”