In January 2004, landlords expected to grow their portfolios by 1.1 properties by the end of 2004 and have succeeded in doing so: landlords now have an average of 7.1 properties in their portfolios compared to 6.0 in January 2004. Landlords anticipate that they will increase their portfolios by a further 18% to 8.4 residential properties over the next 12 months. Adding just over one property in the year is in line with the steady growth we have seen in recent years.
These plans for steady, gradual growth reflect the experience of the landlords surveyed. In January 2005, 76.5% of respondents had been landlords for more than 6 years. On average respondents have been residential landlords for 8.7 years and are clearly not the amateur speculators that some make them out to be. These experienced landlords have not been put off by the cooling market and are keen to stick with their investments. This is supported by the fact that 83.9% of respondents cited the potential for long-term capital return as their reason for buying more property, reflecting the fact that experienced landlords see buy-to-let as a long-term investment vehicle and have confidence in the market over the long-term.
They continue to be successful managers of their properties, void periods are stable at a very comfortable 2.8 weeks per year and maintenance costs run at an average of 12.6% of rental income, leaving plenty of rent to cover mortgage costs. There are also good prospects for rental growth. 74.6% of landlords will be reviewing rents in the coming year and expect to increase rents by an average of 4%, well above the rate of inflation and thereby enhancing their returns.
Demand for rental accommodation remains strong. 79% of landlords’ tenants are working people without children. These are the first-time buyers of tomorrow who will eventually choose to settle down and have children. In the meantime rental accommodation is the best choice for people wanting affordable accommodation and the flexibility to move around as they wish without being tied by property and family.
Nicola Severn, marketing manager at Mortgage Trust, concludes: ‘buy-to-let is a specialist sector where experienced investors plan carefully to expand their portfolios and treat them in a business-like manner. Mortgage Trust’s January Landlord Survey reaffirms the fact that professional landlords have not been put off by a cooling housing market. Respondents plan to continue to implement growth strategies over the next 12 months, with the goal of long-term capital gains.”
