Predicted property spree in second homes

27th October, 2005

RICS has predicted that the tax break enabling wealthy pension-holders to buy residential property at a hugely decreased price will result in £24 billion extra being spent on second homes.

A change in pension laws is expected to lead to a boom in the purchase of second homes, which will of course have a knock-on effect on the number of home insurance policies being taken out.

The Royal Institution of Chartered Surveyors (RICS) has predicted that the tax break enabling wealthy pension-holders to buy residential property at a hugely decreased price will result in £24 billion extra being spent on second homes and buy-to-lets.

RICS explained that higher rate tax-payers will be able to buy a home priced at £150,000 ? the average recorded UK house price ? for just £60,000, as they will be able to call on an extra £40,000 in tax relief, while also being able to borrow up to 50 per cent of the value of their pension fund, making up the remaining £50,000.

However, RICS warned: 'The idea that an individual should plough all of their existing pension and other savings into residential property is undoubtedly a risky move.'

Shrewd homebuyers will undoubtedly reduce some of this risk by taking out a high quality home insurance policy so as to safeguard their investments.

The new legislation will come into effect as of next April.

 

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