Pensions rule changes are set to make property hotspots more attractive, while having little impact on the wider market.
That is according to a new report by the Royal Institution of Chartered Surveyors (Rics) into the effect of allowing Britons to invest in residential property as part of their Self Invested Personal Pensions (Sipps).
Currently a Sipp can only be used to invest in commercial property (with a few small exceptions), but after April 6th - or "A-Day" - residential property, both in the UK and overseas, can be invested in with accompanying tax relief.
Under the new scheme property can be purchased with income tax paid back, meaning a higher-rate taxpayer could effectively buy a £200,000 property for £120,000. Taxpayers on the standard rate of 22 per cent would pay £156,000 for the same property.
New work by Rics predicts a steady flow of property into Sipps, with up to 160,000 extra residential property purchases made over the three years following the changes.
But this inflow of property investors looks set to be focused on areas of the property market that are already climbing.
Overall, 51 per cent of surveyors expect house prices to rise after A-Day, but this figure rises to 71 per cent of surveyors in the north and 69 per cent in Scotland - compared with 41 per cent in the south east.
But the impact will be smaller than many predict.
"Reports of a mad rush of property to Sipps are exaggerated. The size of the housing market means that demand can be readily absorbed in most areas," said Rics chief executive, Louis Armstrong.
Fewer than one per cent of chartered surveyor estate agents predict a large rise in house prices.
The Rics report also expresses concern over possible mis-selling with 'property pensions' and advises everyone thinking of taking out this option to consult a qualified independent financial advisor before making any important decisions on a financial product.
Rics areas of concern include:
- The current uncertainty over the detail of the Sipp rules.
- Pensions that are over-exposed to property.
- Administrative costs.
- Pensions mis-sold through, for example, unregulated property investment clubs.