In May 2005, landlords held an average of 7.5 properties in their portfolios, up from 7.1 properties in January 2005 (see figure 1), and they anticipate that they will increase their portfolios by a further 12% to 8.4 residential properties over the next 12 months. This steady planned growth of one property per year shows that landlords are not ‘get rich quick’ speculative investors, they are buy-to-let investors who are professional in their approach and aim to build balanced, working portfolios that are sustainable over the long term.
The landlords surveyed in May had an average of 8.6 years experience in the residential buy-to-let market, up from 7.8 years in July 2004. They have a significant investment in property, with the average portfolio valued at £931,100 up from £822,100 in July 2004.
This strategy of considered and steady long term investment is reflected in landlords’ attitude to new build property. 77% of Landlords do not have any new build property in their portfolios and prefer to purchase established property which is often popular with long-term tenants and has the potential to provide higher yields. Where landlords did include new build property in their portfolios, they were not swayed by marketing incentives, such as gifted deposits, but instead identified low maintenance as the primary benefit.
Landlords also continue to be successful managers of their properties. They have a keen business sense, responding intelligently to the current market environment (see figure 2). 34.2% plan to remortgage (23.1% in January 2005) while 27.7% are planning on increasing rents (20.8% in January). Remortgaging can help landlords reduce financial costs while raising rents boosts their income. Both measures enhance their overall returns. With rents stable at 6% of the portfolio value, landlords look well placed to prosper in the current housing market conditions.
Nicola Severn, Marketing Manager at Mortgage Trust, concludes: ‘Landlords continue to display high levels of business acumen and are actively managing their portfolios. They are not speculating on house price rises in the short-term: rather they have coherent plans for long term investment. Public perception of buy-to-let is sometimes confused with property clubs and instant millionaire schemes, which often encourage buyers to invest in off-plan, and new build property, with promises of short-term capital return for little or no initial deposit. To the contrary, genuine buy-to-let landlords have strong business plans, use long-term tenancies and are cautious investors. They consider new build property only as part of a balanced portfolio. In the long-term it is the experienced landlords with strong business plans who will succeed.”
