We are pleased to see that one third of landlords are looking to expand their rental portfolios in the next 12 months. The latest BM Solutions/ BDRC Continental Landlord Panel, a key barometer of the sector, shows landlords are looking to boost their portfolios.
The data shows a growing confidence in the UK housing market and the fundamentals of buy-to-let.
At the end of 2011 52 per cent of landlords were reporting an increase in tenant demand, compared to 35 per cent in Q4 2013.
However, a much greater proportion are reporting ‘no change’ in demand, with stability further reinforced in the market’s profitability profile.
Buy-to-let growth
We are pleased to see more landlords looking to grow as the buy-to-let sector is strong. We have seen mortgage lending grow in the last year to landlords and the fundamentals are strong.
The average first-time buyer is 38, without parental help, due to rising house prices and demographic change.
Today there are a growing number of students, immigrants and single people all enjoying the flexibility of renting. Alongside the long-term shifts there are short-term economic benefits in the form of fewer void periods, when a house lays empty.
A third of landlords reported at least one void period over the past three months, a decrease of 2 per cent.
The average void period fell by five days to 59 days since the previous quarter.
Landlords with larger portfolios were more likely to be able to cover the cost of a void period with the profits from other properties, rather than relying on savings or day job earnings, providing another potential motivation to increase portfolios.
Rental yields
Rents are continuing to rise as the shift towards tenancy takes place on a bigger scale and many are priced out of buying.
The research also revealed that an average amount owed by tenants in arrears has fallen to a new three year low of £1,499.
Over the past quarter, the average rental yield in the UK was static at 6 per cent. In comparison, the average rental yield was 6.1% per cent in Q1 and Q2 2013.
Three in five landlords raising rents did so when new tenants arrived, with53 per cent doing so to bring their pricing in line with the local market.
The strongest performing region was the North West achieving a return of 6.4 per cent; with the London and the South West seeing the lowest returns at yields of 5.6 per cent.
Confidence in the buy to let sector has fallen slightly from the six year high reported last quarter.
A total of 63 per cent of landlords are confident in the prospects for the future, down from 68 per cent.
However, optimism around capital gains and the broader economy is continuing to increase.
This reflects a number of house price surveys showing expected growth of around 7 per cent this year.
The UK economy is also picking up pace with expected growth of 2.5 per cent this year.
Mortgage lending is also expected to hit a six year high at almost £200bn compared to £178bn last year.
This is why 80 per cent of landlords are continuing to make a profitable full time living from letting
Meanwhile, a massive 76 per cent of amateur landlords able to supplement their earnings with rental income from tenants.
We are excited about the data and agree with landlords they should be looking to grow in this environment.
