WHENEVER I turn on the TV these days, I seem to find myself glued to programmes about property…

From Channel 4’s ‘Grand Designs’ to the BBC’s ‘Homes under the Hammer’ – and many more besides – we quickly find ourselves immersed in various ambitious developments or refurbishment projects.

Given the enduring popularity of these programmes, it’s perhaps unsurprising that investing in property as a retirement strategy has also grown popular for some.

To an extent, this has also been driven by low interest rates.

Many who ventured into buy-to-let investments instead of traditional pensions initially benefited from a period of cheap mortgages and rocketing house prices.

But the outlook for buy-to-let may not currently be as promising, and those considering this path should think through their options carefully.

Buy-to-let challenges…

It’s been well documented that there’s a chronic housing shortage in the UK and this clearly supports continued house price growth due to high demand and limited supply.

But the significant rise in interest rates over the past two and a half years has made property purchases far more expensive, reducing rental income - and profitability - for buy-to-let investors.

This higher cost of borrowing poses a substantial challenge to those relying on property for retirement income.

Moreover, recent tax changes have further eroded the appeal of buy-to-let investments.

An additional 3% stamp duty surcharge now applies to second property purchases, and the tax treatment of rental income has become less favourable.

Previously, higher and additional rate taxpayers could offset mortgage payments against their tax bills - saving 40% or 45% in taxes.

These days, this relief is capped at just 20% - which significantly reduces the financial benefits of buy-to-let investments.

Maintenance considerations…

Beyond these key financial considerations, property ownership comes with various other costs that frequently erode returns.

For example, after survey costs, legal fees and stamp duty have been paid there will also be letting fees and landlord insurance as well as ongoing maintenance and repairs.

And that’s before periods without tenants are factored into the equation.

These expenses – particularly when combined with mortgage interest - can make buy-to-let less lucrative than anticipated.

What pensions offer…

Pensions offer several advantages that property investments lack.

Employers are required by law to contribute to employee pensions, often matching employee contributions which effectively doubles the investment.

Tax relief on pension contributions further enhances their appeal, with basic, higher, and additional rate taxpayers enjoying significant cost savings.

Pension investments grow free from income and capital gains taxes, and 25% of the pension can be withdrawn tax-free at retirement.

Pensions also provide greater flexibility in generating retirement income.

Unlike property, which cannot be partially liquidated, pension investments can ‘drawn down’ incrementally to meet income needs.

While property can play a role in retirement planning, pensions and ISAs usually offer steady returns, lower costs, and fewer risks, making them a preferable choice for most.

If you’re considering going down the buy-to-let retirement route, it’s crucial to thoroughly understand all associated risks, costs, and taxes before proceeding.

If you have any questions about the best way to get your finances on track, please get in touch with Jillian or another member of the Amber River Leodis Wealth team by going to https://wealthmanagement.uk.com/ .

No individual investment advice is given, nor intended to be given in this article and liability will not be accepted in respect of any action you may take as a result of reading this article. If you are unsure you are urged to take independent investment advice.