The property market has taken a beating, but it still compares well with a traditional pension

Two pillars have long held up hundreds of thousands of retirement dreams: the stock market and the property market. Cracks have emerged in both this year.
Savers relying on their workplace pension have watched the value of their pots sink, thanks to a twin sell-off in both the bond and stock markets.
Meanwhile, rising mortgage rates have hit buy-to-let profit margins, leaving a dent in landlords’ retirement plans. In the last 12 months alone, the average rate for a two-year fixed buy-to-let mortgage has more than doubled from 2.9pc to 6.43pc, according to the analyst Moneyfacts.
Yet yields in the sector remain competitive compared with the income that most savers draw from a traditional pension – and could still rise.
The average gross yield on a new buy-to-let purchase still stands at a healthy 6pc, according to the estate agent Hamptons. That is in contrast with a target 4pc rate of income from a typical pension pot in drawdown.
Experts have warned that the buy-to-let sector could suffer next year, as landlords face greater regulatory pressure to invest in energy upgrades, as well as the prospect of paying higher levels of tax under Government plans to cut capital gains allowance.
However Mark Harris, of the broker SPF Private Clients, argued that despite the regulatory changes dominating headlines, the market still looked attractive for people looking to invest over the longer term.
“Demand for rental property is unlikely to fall anytime soon, with more people having to rent for longer because they can’t afford to buy, the need for good quality rental property at a reasonable price is higher than ever,” he said.
“What’s more, with a number of landlords selling up because the increased tax and regulatory burden has become too much, demand is only going to grow. If the rest of your investments have been in stocks, bonds and cash, it is good to have some exposure to bricks and mortar.”
For workers near retirement with diminishing time to recoup their losses, the fate of the stock market next year is anxiety-inducing.
Analysts at the investment bank Deutsche Bank have predicted that major stock markets could still fall a further 25pc next year if the American economy enters a downturn.
However, Callum Stewart, of the pensions specialist Hymans Robertson, noted that stock markets would also recover over the long-term, and that savers should not rush to abandon their invested pots. A worker turning 66 next year could feasibly have almost two decades ahead of them to regain lost returns over the course of their retirement.
“A defined contribution pension is generally invested in a well-diversified manner, meaning that while interest rates are rising or property markets experience headwinds, as they are now, your pension should be more resilient as it is exposed to a range of markets, not just one.”
But while headwinds in the property market have spooked many landlords, a correction could work in favour of investors looking for a buying opportunity. A house price fall could push up rental yields,  drawing in more landlords seeking income.
Mr Harris added that despite much noise about house price falls next year, capital growth was not off the table for new investors in the sector.
“Buy-to-let benefits from capital growth over the long term,” he said. “This means you can enjoy a regular and fairly predictable income, but also eventually benefit from capital appreciation should you decide to sell up and bank the profits.”