Property will be my pension! Well, don't be so sure!

Property will be my pension! Well, don’t be so sure!


A recent headline showed that “inflation wipes thousands of property values”.


For more years than I can remember I have met with clients who have said, “my property would be my pension plan”. Certainly historically we have seen some good results but we have to keep a perspective.


Analysis from LSL Property Services showed that house prices had increased by just 11% between 2006 and 2011. Not bad? However, inflation had increased by 17% over the same period. For some areas of the UK situation is far worse as prices have been fairly static since 2006 and verse a substantial loss has occurred, if only on paper.


The article quotes a homeowner in the North West who bought a property for £250,000 in 2006. In real terms that house has lost more than £42,500 since then because of the effects of inflation. Not a problem? I can wait it out?


Hopefully yes but think about the person who saw the property as their pension fund or possibly worse as the asset which was going to see them through long-term care. With long-term care fees being in the region between £35,000 and £50,000 a year (possibly higher) then in effect that sees their ability to fund long-term care fall from 5 years down to 4 years approximately. How would you feel if you have been relying on those proceeds to give you independence and have the realisation that you are having to sell, losing a 5th of what you had anticipated?


I’m sure there are very few of us who would not accept that property can be a good investment over the longer term but like all investments it needs to be monitored and balanced with other assets as well.

So, my message is.

Be careful about relying on just one investment area to help you towards your personal business plan to retirement. Particularly one, like property, which is not liquid.


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