Paragon’s buy-to-let trends survey of landlords shows that despite rising interest rates, landlords are more confident than ever in their property investments. The index – based on the value of their property portfolios now and the expected value of their portfolios in twelve months’ time – stands at 160, up from 155 last quarter and from 150 this time last year.
With tenant demand outstripping supply, landlords have been able to increase rents in the face of rising interest rates and higher house prices. As a result, the returns on property investment remain attractive. The average yield for landlords with three or more rented properties has risen from 6.1% in February to 6.3%.
Professional landlords, for whom buy-to-let is a major source of income, have also taken advantage of slowing house prices by adding to their stock of properties, with many planning to continue to grow their portfolios further over the next 12 months.
Landlords currently have an average of 11.5 properties in their residential portfolios, up from 11.1 in February, but expect to have 12.5 properties in a year’s time. House price growth is beginning to slow and with landlords in a strong position in terms of setting rent levels, they can see the advantages of expanding their portfolios in the near future.
John Heron, managing director of Paragon Mortgages, commented: “Landlords are confident because tenant demand is strongly underpinning the market. Young people are choosing to stay in rented accommodation for longer, while there are a growing number of students and immigrants who are fuelling demand for rented property. Just this week we have had data on record numbers of students and strong net immigration figures which indicate demand for private rented property will continue to rocket.
“Despite ill-placed criticism of the buy-to-let sector, rented accommodation is becoming an increasingly important part of the UK housing market – providing homes for the growing number of people who do not want the commitment of owning their own property - and this is reflected in landlords’ confident outlook for the sector.”
