Pension paid-for property in Spain is no longer an impossible dream after the UK Government’s decision to free-up private pensions so over-55s can do whatever they want with their fund. The move has created immediate interest in reinvesting pension pots in a property in Spain.
Pension holders have told Spanish bank property specialists, Walker Property Spain, they are interested in using their pensions as a deposit on a buy to let property and then using either annual lump withdrawals from pension pots or rental income to service a low cost Euro mortgage.
With mortgage interest rates starting at around 2%, some pension holders at age 55 would be granted 20 year term loans and for older pensioners there would be advances to age 75. Monthly repayments could be covered by just one week’s rental income from a golf or beachside villa or apartment in one of the most popular Costas.
Prospects of useful equity gains in the medium term would be good, given that peak to present property prices are down 44% and WalkerSpain.com has been selling €1M golf course apartments for €200,000 in recent weeks – discounts of 82% from the original developer prices. Buyer demand has returned to peak 2007 levels.
Here’s how it might workout
2-bed Costa apartment
Property price €150,0000
30% pension deposit €45,000
Mortgage at 2% interest on €105,000
Monthly repayment over 15 yrs €681
Typical weekly rental €200
- All properties in image are, new, key ready bank owned bargains
One prospective pension buyer said: “This is better than having to buy an annuity from a company that will benefit from it more than I would. In a pension pot of £100.000 an annuity only provides £5.800 a year back – just break even if you live to 84 years of age. If you die sooner they keep the rest of the pot and any interest as unearned profit.”
Ben Walker said the firm was discussing the Pension for Property in Spain issues with banking partners and would be publishing a report shortly so that UK pensioners would have enough time to evaluate the prospects before the new pension freedom rules applied in April 2015.
He said: “We also have pensioners based in Australia, where pension restrictions were abandoned in the 1990s – planning to invest their superannuation pots in Spanish real estate which they realise can produce a good return as the country recovers and the tourism sector continues to boom.”
Spain and France best places for quality of life
Spain and France are the best places to live, according to the latest uSwitch Quality of Life Index.
The UK came 9th out of the 10 European countries in the Index, due to high living costs, below average government spending on health and education, short holidays and late retirement. The UK no longer enjoys the highest net household income in Europe.
The Index shows that people in France enjoy the highest quality of life, closely followed by Spain, while Denmark, Poland and Germany fill the remaining top five spots. All these countries offer more days of holiday and a lower retirement age than the UK and Ireland.
Ann Robinson, director of consumer policy at uSwitch, said that last year, Britons were miserable but rich. “This year we’re miserable and poor. Whereas some countries work to live, UK consumers live to work. In fact we work harder, take less holiday and retire later than most of our European counterparts,” she added.
Given how the UK compares, one in three thinks that now would be a good time to emigrate – with or without using that hard-earned pension pot.