Pensions versus Property Investing and Do We Need So Many Housing Associations

It must be the new government having an effect on me (or maybe it is the sun) but I have decided to go a bit political this week.

Base rate remains on hold this month but one thing that won’t be staying on hold is the mechanism that is used to up rate pensions to account for inflation. It looks like the lower CPI inflation measure, not the historically higher RPI will be used in future when your pension funds come to work out what you will get in income from your little pot of money that you had to work to age 65, 66, 67, 68, 69, 70, 71… for. (Yes, the age is going up)

Property v Traditional Pensions

Those who did not trust the government and pension funds and invested in residential property instead (as their own little pension) will not be affected by this of course! This is part of the reason property as an investment still retains some attractions. (You could add the split cap investment trusts scandal, the Equitable Life scandal and the duff returns on endowment mortgages to a list of reasons why people like property.)

Despite the increases in red tape there has not (thus far) been too much government interference in the private rented sector. Private landlords remain free to invest where they wish and adjust rents to what the market will bear, though some who depended on pretty generous LHA payments in London may need to think again now. Which leads me neatly back to the dangers of an investment strategy that is government dependent (e.g. standard pensions!)

Certainly investing in the private rented sector is continuing to attract people in and existing landlords to invest more. According to think tank BSHF, if recent trends persist, the private rented sector (PRS) would be larger than the social rented sector by 2013 and by the end of the decade one in five households could be private renters. They add “It seems reasonable to assume that some of the likely drivers of recent changes in tenure mix will continue and, therefore, that the private rented sector will continue to grow.”

Six years ago I predicted one in three households could be in the PRS by 2026. Back then few commentators agreed. Now, it seems quite a few others are getting on board and backing my predictions.

Are First Time Buyers Really Priced Out?

But where does all this buy to let stuff leave the first time buyer? Are they being priced out? I’m not sure they are priced out because borrowers moving home in May saw their mortgage interest payments account for the lowest proportion of their income in 35 years, according to new data from the Council of Mortgage Lenders. So why aren’t the first time buyers out in force?

Well, I guess there is a fear among first time buyers and others about their own economic prospects. People aren’t buying in droves because they are worried about their jobs, possible house price falls, worries interest rates could rise and also to some extent because of the high deposit requirements the lenders are asking for. These things do constrain would be house buyers but all the same, this attractive affordability position hardly paints a picture of millions who are being priced out of buying a home. It’s always a big jump to buy your first property but as Warren Buffet says, “the time to buy is when others are fearful.” First time buyers should ignore the dire warnings from the likes of Capital Economics and the like and get in and buy within the next 12 months or miss the boat when house prices rise again in 2011.

1200 Housing Associations in the UK – Is that Enough?

I see there are “significant problems” with housing associations in Northern Ireland, according to a report from the Audit Office. The watchdog found 14 out of 33 of the province’s housing associations were performing at an ‘unacceptable’ level, and that many were underachieving on property maintenance. One may wonder why the venerable province of Northern Ireland needs 33 housing associations.

I’m no expert in housing association management but I would have thought that this number is too many. There are over 1200 housing association in the UK. Yes, twelve hundred. Surely, there must be some economies of scale that could be realised with a smaller number?

I really wonder about the efficiency of some of these institutions. I’m sure that many are very well run with dedicated staff and my own experience of a few local authority’s housing departments and housing associations has convinced me there are some excellent people doing some great work. But there are clearly some duffers too. Here in sunny South London my own experience of an arms length housing management company (yes, I know it’s not an HA) who manages the communal areas of one of my let properties (previously the local authority did it) is that they could not manage their way out of a paper bag let alone get basic fixes done. In the end only my letters to their Chief Exec (whose salary has five noughts on it) got them to do anything about the things that were wrong at the property.

Dismantling the Big State is not Always a Bright Idea

The Conservatives are all for decentralisation and dismantling the state (or as they would no doubt put it “bringing control closer to local communities.”) This is all very well but even though big state bodies can be inefficient, there is also a huge lack of control that comes from doing things in a very distributed or decentralised way. Some things simply don’t lend themselves to market economics.

I’m convinced that it would be better if social housing was mainly built and managed by local authorities. And, of course if there was more of it! People on low incomes are still suffering as a result of the great council house sell off. Private landlords have plugged the gap but the debate now raging on changes to Local Housing Allowance (LHA) rates is surely simply a symptom of that.

For more on the big LHA debate, please select “Housing Benefit” from the drop down category list to the right. We are having a break from blogging for a week  – the next blog will be on Tuesday August 3rd.

MORE ABOUT LETTINGFOCUS AND WHAT WE DO is the home of Landlord Information.

I’m David Lawrenson, a landlord and property investor myself for over 25 years and author of “Successful Property Letting” – the UK’s top selling commercially published property book for the last 3 years.

Services to Businesses and the Public Sector

Primarily I work as a consultant to banks, local authorities, social housing providers, insurers and other organisations – helping them with their landlord facing or buy to let product strategies and services.

For example, I help banks improve their buy to let mortgage lending. I help housing associations / local authorities find private landlords (private rented access schemes, local letting agency models etc) and I also advise institutional investors looking to get into buy to let.
I also write for property websites and am regularly quoted by the media.

Services for Private Landlords

We also find some spare time to help landlords and property investors by coaching them in how to make money in the private rented sector using ways that work, which are ethical, fair to tenants and which involve minimal risk to the investor.
We pride ourselves on giving independent unbiased Buy to Let Advice on a one-to-one mentoring / coaching basis or through our occasional group seminars.



You can also use the tags and categories to read blog posts on related posts. (To find relevant posts from before 30 April 2010 you can also click on LettingFocus’s Old Blog  – Categories, then search from the list for a topic that interests you and click to read all the posts we have written under that Category / Topic.)

THE HOME PAGE OF OUR MAIN SITE click here: LettingFocus Home Page

For general info on our CONSULTING SERVICES click here: Consultancy and Seminars


NEXT SEMINAR AND NETWORKING EVENT for Landlords and Property Investors:
Next Property Investment Seminar and Networking Event

We have OFFERS on some services and products here: Services and Products for Landlords

TO READ CLIENT TESTIMONIALS – from both commercial organisations and private landlords click here: Testimonials

BUY “SUCCESSFUL PROPERTY LETTING” click here: Buy the Book at Amazon plus anything else at If you are from an organisation and would like to bulk order for a minimum of 50 books (delivered to a UK address), please contact me at [email protected] for special bulk price rates.

simply send an email to [email protected] – Please note we WILL NOT send spam or sell our mailing list to advertisers!



See our TWITTER PAGE: Twitter

Copyright of Blog: David Lawrenson 2010. This blog is updated roughly once a week usually on a Monday or Tuesday.

One comment

  • There is always something attractive about owning property rather than a pension. A property you can actually see and say that is mine, and while the price of it goes up and down you do have the physical reassurance of being able to see what you own. A pension in contrast can rapidly gain or lose value and because you have no physical asset for a lot of people property would feel the safer way to go.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.