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Landlords generate £10bn ‘pension’ net income

Buy-to-let investors over the age of 65 generate a net income of around £10.1bn, with over half (54 per cent) of them using their property portfolios as long-term investments to contribute to their pensions.

These residential investments generate income for nearly half a million (483,000) over 65s, according to analysis of the latest English Private Landlord Survey by national estate agent Savills. 

After deducting outstanding mortgage finance, these investments – which total nearly 1.5mn properties – represent a net wealth of £378bn.

“Buy-to-let investment has been an attractive way to supplement or build up retirement savings over the past 20 years, especially for the self-employed”, said Savills’ residential research head, Lucian Cook.

“Many are proclaiming that the golden age of buy-to-let investment is over because of increased regulatory requirements, a higher tax burden and the prospect of further increases in the cost of debt. 

“But it is set to play an increasingly important role in providing pension income, with many landlords, who were at the forefront of the buy-to-let explosion of the noughties, now hitting or approaching retirement age.”

The estate agent found one in 10 (11 per cent) of those approaching retirement expect that property will be their biggest source of retirement income. This increases to one in five (20 per cent) among the self-employed.

“Older landlords, in particular, have accumulated significant housing wealth through their investments. That means that they are in a good position to weather the storm as economic conditions toughen, being well insulated against interest rate rises,” Cook said.

“As a result, they will be an important source of private rented accommodation for younger households, especially as more heavily leveraged landlords find it more difficult to make the sums add up.”

But while some landlords will be able to hold onto their buy-to-let properties into retirement, many property investors may have to exit the space before they reach their pension age.

Tax firms have warned that if the government overburdens buy-to-let landlords with too much red tape, investors will be pushed to exit the market.

The warning follows a number of announcements from the government around improving renters’ rights and helping more people to buy their own home.

At the beginning of this year, some landlords were also considering whether to sell up their portfolios, as by 2025 all newly rented properties will have to have a certification rating of C or above, with existing tenancies needing to comply by 2028. 

The cost to landlords will total an average of £10,400 per property to get them up to standard, according to data published by Aldermore Bank.

For some in the buy-to-let business, these costs are proving too much to stay in the business. 

ruby.hinchliffe@ft.com