There is no shortage of press when it comes to property investment in 2018, and much of it reflects negatively following government tax changes to do with mortgage interest and stamp duty, effectively meaning that income from property is taxed more punitively than other types of income.
True though this is, it is important that people do not let their judgement be clouded by negative press when there is such a vast amount of viable property investment strategies and opportunities for the investor who is willing to either undertake sufficient due diligence, or seek advice.
There is a myriad of benefits to property as an asset class and many of them have been discussed in previous blogs. What is arguably the most attractive benefit when considering income for retirement? – INDEX-LINKED RENTS.
Because renters assess their wages to determine how much can be spent on rent, rents are linked to wages. When plotted beside each other on a graph, the correlation between wages and rents are noticeably aligned. With the exception of very recent years this is generally the case, meaning that (generally) rent rises with the same pace as inflation. Now it goes without saying that this correlation will not be perfect.
What it does mean is that if our hypothetical buy-to-let-funded retiree is living off £40,000 in rental income the year he retires, he’ll be very close to living off to the inflation adjusted equivalent of £40,000 even when he’s 30 years into retirement. The amount of goods and services he’ll be able to purchase will not have changed.