Why you should invest in Birmingham property for your retirement

For the retirement lifestyle, you deserve and desire, have a strategy and a location

With low-interest rates, volatile financial markets, and a global economy that appears to be stagnating, many people will rightly be concerned about their retirement years. Just how much money do you need to retire comfortably, and how can you save enough?

Property has proven to be the best long-term investment. It is more stable than share markets, usually benefits when interest rates are low, and is the most responsive asset to supply and demand I know. After all, shelter is a basic human need.

As the population grows, more people need homes. This is why, even when the economy tanks, property prices usually hold up much better than share prices, the value of art collections, gold and silver prices, and so on.

In this article, you’ll learn why property could be the perfect investment asset to build a comfortable retirement.

How much money will you need in retirement?

Most financial advisors agree that you’ll need around two-thirds of your final salary per year before you retire to pay for your spending in retirement. So, if your final salary before you retire is £45,000, you’ll need £30,000 per year to retire.

Calculating what you need to produce this can be done in one of two ways:

  1. The first is to guess how many more years you may live and multiply by £30,000. For example, if you think you’ll live for 30 years, you’ll need £900,000 in your pension pot.
  2. The second is to figure on a 5% withdrawal from your fund each year. If your fund makes 5% every year and you withdraw the return every year, your fund will remain intact and it won’t matter how long you live. In this case, to retire on £30,000, you’ll need to have a fund of £600,000.

So, you need to save enough to create a fund of between £600,000 and £900,000 to retire with an income of £30,000. However, there is one small problem:

Inflation and investment returns in retirement will affect your spending power. If inflation rises, you’ll need to take more out of your fund. If your investment returns don’t keep pace with this, your money won’t last as long as you plan, unless you reduce your standard of living as you get older.

How does property investment help in retirement?

When considering property investment or pensions savings, there is a lot to consider. One of the main ones should be how to sustain your lifestyle throughout your retirement. For this, buy-to-let property can be fantastic. As prices rise, your tenants expect their rents to rise. It’s a natural inflation-proofing. In addition, the property remains yours and could increase in value. In the UK, property prices have doubled every seven to 10 years on average for the last 100 years (though, of course, the past is no guarantee of the future).

Property doesn’t tend to crash by 30%, 40% or 50% like shares do every 10 years or so. That’s because of the constant (and growing) demand for new homes.

So, property is a great investment for retirement purposes – provided you buy the best property you can in the best location. For example, if you buy in an area that is dominated by a single employer, should that employer go bust or move, the demand from tenants for your property is likely to crash.

Why Birmingham is the ideal location for property investment for retirement planning

Birmingham, the UK’s second city, is one of the most attractive locations for long-term property investment in the UK. Here are just a few reasons why:

  • Investors are benefitting from massive regeneration across Birmingham.
  • The local government has a highly ambitious and detailed Big City Plan that looks forward to the next two decades – with years of stunning economic growth mapped out to add more than 50,000 jobs in the city.
  • HS2 is on its way here, and this will reduce travel times to London to less than 50 minutes. This will improve connectivity in an already well-connected city – could Birmingham become a commuter town?
  • It is the host city for the 2022 Commonwealth Games.
  • Birmingham has a thriving and diverse local economy, with new business numbers growing at three times the UK average rate.

Demand for property is high here, and with the population forecast to grow by 12% by 2032, this demand will only increase. It is a young population, too, with more than 40% under the age of 25 – ideal targets for the buy-to-let market.

Over the last three years, property prices in Birmingham have been rising by between 5% and 10% each year, and further growth is forecast. Knight Frank expects the average price to rise by 14% between now and into 2020. Hometrack forecasts price growth of between 20% and 30% in the next four years.

In summary

If you want a comfortable retirement, one in which you have the income to do what you want to do and live the lifestyle you desire, you should consider property investment. And you don’t need to be a property mogul with a portfolio of hundreds of properties to create the income you need.

What you do need is a strategy to develop a portfolio of three properties (yes, you did read that right – three), and to buy those properties in a location that will support and sustain long-term investment.

The location is Birmingham. The strategy is called The 3+1 Plan. To find out more and receive an in-depth appraisal of the best property investment opportunities in Birmingham, get in touch with Gladfish today.

Live with passion

Brett Alegre-Wood

Brett Alegre-Wood
May 3, 2019

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