Despite continued negative sentiment on the buy-to-let sector, 2004 turned out to be a strong year for investor landlords, with high growth in the size of property portfolios, sustained growth in tenant demand and strong profits for buy-to-let mortgage lenders. Landlords expect another year of growth in 2005, with numbers of properties owned expected to increase by 5% over the next 12 months.
Thursday, January 6th 2005, 5:35PM
by The Landlord
A year ago, Paragon Mortgages’ Landlord Buy-to-Let Trends survey showed the average landlord owning 11.3 rental properties. The average landlord’s portfolio has now risen to 12 properties with landlords currently forecasting that their portfolios will grow by 5% over the next year to 12.6 properties – an increase of 1 property on this time last year.
Professional landlords buy in response to identified tenant demand and recent signs of a more positive trend in landlord rental incomes as recorded by RICS and Paragon Mortgages seem to suggest an increase in demand for rental properties. According to Paragon figures, landlord rental incomes have risen over the past three consecutive months to reach an average of over £10,000 for the first time and 88% of landlords now believe that demand for residential property is either stable or growing.
John Heron, managing director of Paragon Mortgages, says: “Tenant demand is the driving factor in buy-to-let. The recent slowdown in the owner occupier housing market has had a positive impact for buy-to-let landlords. Demand for rented accommodation is rising as many potential buyers put off the decision to purchase in an uncertain market, and this is putting upward pressure on rents.
Rapidly rising house price inflation has placed particular strain on first time buyers. Paragon research found that although people typically leave the home at age 20, only 60% succeed in buying their own home by age 30. With an acute shortage of social housing the private rental sector is filling the accommodation gap, giving rise to sustained rental demand.
