Buy-to-let confidence boosted by tenant demand

Nia Williams

November 5, 2010

According to the survey, 48% of landlords think now is a good time to invest in property, an increase from LSL’s previous sentiment survey in Q2 2010 (42%).

Just 1 in every 100 landlords believes it is now a good time to reduce their portfolios. Almost three-quarters (72%) of landlords polled by LSL Property Services plc are planning to maintain or expand the size of their portfolios over the next twelve months.

Growing demand for rental accommodation is the main reason for the increase in confidence. With supply limited, as rents are being pushed up and landlords are less concerned that their properties will be unoccupied. In the past three months, 50% of landlords have seen a rise in tenant demand and 69% expect demand to grow in the next twelve months.

The latest LSL Buy-to-Let Index also showed that this contributed to rents reaching a record high in September, of £689 per month, following eight consecutive months of rises.

David Brown, commercial director of LSL Property Services, commented: “Optimism is growing amongst landlords underpinned by very strong tenant demand, which has pushed up rents to new heights. With mortgage lending conditions so tight and uncertainty over the direction of house prices, many would-be buyers are choosing to stay in the private rented sector for the time being.

“The majority of landlords anticipate that tenant demand will increase further in the next year. The government’s spending review last month is expected to swell the ranks of tenants as potential social tenants opt to enter the private rented sector, instead of facing long waiting lists for social housing where they can expect to pay 80% of market value. An increase in the supply of rental accommodation will be necessary to meet this demand – and many landlords recognise this as an opportunity for investment.”

The principal obstacle to even greater investment for landlords is ongoing mortgage finance constraints. 71% of landlords who have recently attempted to raise mortgage finance think it is more difficult to secure than a year ago. Only one in twenty landlords (4.8%) believe it is now easier to obtain mortgage finance. However, there is some evidence that this situation may be starting to ease, as a number of new buy-to-let products have been released by lenders in recent weeks.

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