Effect of SIPPs downplayed

Self Invested Personal Pensions (SIPPs) will have a "minimal effect" on the property market, the Royal Institution of Chartered Surveyors (RICS) argue

12:51 27 October 2005

Self Invested Personal Pensions (SIPPs) will have a "minimal effect" on the property market, the Royal Institution of Chartered Surveyors (RICS) argues.

Following analysis, RICS predicts that SIPPs will make regional 'hotspots' hotter, but have a minimal effect overall.

Many analysts had been predicting that up-coming pension reforms, allowing investors to include residential property in SIPPS, would radically alter the property market.

However, RICS' research leads it to conclude that there will not be a "mad influx" of property investment, but rather a steady flow of interest among a specific type of investor.

"Reports of a mad rush of property to SIPPs are exaggerated," said chief executive Louis Armstrong.

RICS predicts that 160,000 extra purchases are likely to be made over the next three years, a figure deemed insignificant compared to the 4,500,000 property purchases predicted overall.

"The size of the housing market means that demand can be readily absorbed in most areas," concluded Mr Armstrong.

Furthermore RICS argues that property investment is only a realistic option for a select few. It predicts that the typical investor will match the profile of second-home owners, being male, 45-64-years-old and in the highest tax bracket.

Despite rumours of a boom in second homes following new SIPP rules, other analysts have also downplayed the implications. It has been suggested that, given Britain's savings gap, few people will have the pension fund necessary to invest in property.