The government’s plan to allow investors to include some kinds of residential property in tax-efficient pension plans is expected to lead to a boost in housebuilding next year.
The government intends to allow homebuyers to put second homes and rental apartments into Self Invested Personal Pensions. This is likely to create a new market for housebuilders, as buyers will be able to claim a 40% discount on the cost of the property.
“Sipps will shore up the buy-to-let market at a time when it looks like faltering. It’s going to be an important part of the investment scene next year,” said Jim Ward, director of Savills Research.
Ward, who was speaking at the launch last week of Savills’ market forecast for 2006, estimates that some £6bn a year could be invested. “There is likely to be a flurry of initial activity,” said Ward. Standard life has already amassed a £1bn investment fund.
Sipps are being targeted at high-earning fortysomethings looking to marry up a second home to a pension plan, but Ward emphasised that they could be used to invest indirectly in other forms of residential property, such as student accommodation.
Sipps will shore up the buy-to-let market
Jim Ward, of Savills Research
The consultant played down ears that Sipp investment could be so substantial that it would push up property prices and add to the woes of first-time buyers. He said: “It is basically sustaining an otherwise weak buy-to-let market.”
Sipps are do-it-yourself pension schemes that allow taxpayers to make their own investment decisions. Hundreds of thousands of high earners are expected to exploit the initiative.