Optimism in buy-to-let market

Nia Williams

January 10, 2011

This is according to research by buy-to-let mortgage specialist The Paragon Group into landlords’ 2011 views and planned behaviour shows that 71% of landlords are optimistic about the prospects for their portfolios during the forthcoming year due to a range of factors.

Paragon’s study showed that over half of landlords (54%) said they were optimistic about tenant demand during the year, with 48% stating that stable interest rates will be a key positive in 2011. Meanwhile, the ability to increase rents was cited as a major reason to be optimistic by 30% of landlords, whilst landlords were also pleased with the wider availability of buy-to-let mortgage finance (16%) and the easing of mortgage lenders’ criteria (13%).

The research shows that regulation tops private rented sector landlords’ list of concerns for the second year in a row. Nearly half of landlords (46%) said they were worried about complying with the level of regulation required in relation to the running of their property business during the year. Landlords operating in the private rented sector are already heavily regulated with an estimated 50 Acts of Parliament and 70 sets of regulations governing the sector.

Other concerns included tenant unemployment (42%), falling tenant demand (14.3%) and the introduction of new Housing Benefit caps (15%).

Paragon’s research also showed:

 Financially sophisticated landlords plan to make a range of investments during 2011. Along with residential property (25%), landlords plan to invest in equities (32%), bonds/gilts (12%), commodities (11%), precious metals (9%) and commercial property (7.1%), as well as holding cash savings (14%)

 Of those planning to invest in buy-to-let property, over half (55%) intend to purchase terraced housing, followed by semi-detached housing (29%), flats (13%), Houses in Multiple Occupation (13%), detached housing (11%) and multi-unit blocks (7%)

 On average, landlords believe the Bank of England’s Base Rate will end the year at 1%, up from the current rate of 0.5%

 41% of landlords plan to increase rents during 2011, with 30.7% planning to increase rents by up to 4% of their current value and 10% aiming to increase rents by between 4% and 8%

 Just under half (45%) of landlords believe tenant demand will grow during 2011, with 44% forecasting that it will stabilise

Nigel Terrington, Paragon Group chief executive, said: “It is clear that confidence is high amongst landlords in the private rented sector. They are benefiting from excellent levels of tenant demand, low finance costs and a strong pricing position. The availability of buy-to-let mortgage finance is also easing, albeit somewhat slowly, and we should expect to see landlord transaction levels increase on 2010 levels across the market during the year.

“This cannot come soon enough. Demand for privately rented property far outweighs supply, which is filtering through to rental inflation, and this will only get worse unless the private rented sector starts to expand beyond current levels.”

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