Landlords looking to expand portfolios in the year ahead

Nearly a quarter of landlords are looking to buy more properties in the year ahead, after rising rents and falling rent arrears over the past 12 months.

New research conducted by online letting agent Makeurmove.co.uk shows that the vast majority of landlords experienced good rental yields in 2013 with 59% achieving between 4 and 8%, while 25% achieved a yield of 8% or more last year.

Almost 60% of landlords expect to see property values continuing to increase in 2014, with nearly a third of landlords also enjoying sizeable equity in their property, with a loan-to-value (LTV) ratio of 20% or less.

One concern they did concede however was that of rising interest rates, with nearly half of landlords asked believing that rates are set to rise over the next two years.  

“Our research demonstrates that landlords are feeling positive about the buy-to-let market, having hopefully seen the back of restricted finance and rising rent arrears. The news that buy-to-let lending will reach £25 billion by the end of 2014, which represents a 25% increase on lending in 2013, is an indication that the buy-to-let market is starting to grow again,” says Richard Francis, director and founder of Makeurmove.co.uk.

“Rents are rising across England and Wales, hitting record levels in September, with the average price paid by private tenants reaching £757 a month. Landlords can look forward to a more profitable year ahead if they capitalise on this market opportunity.”

A separate study from Mortgages for Business concurs that landlord’s appetite for more properties stems from the attractive yields (averaging around 6.7%) currently available on residential investments. Of those looking to expand, some 88% are looking towards residential purchases.

Only 11% of those surveyed said they were planning to buy semi-commercial property and just 7% commercial property. Investment in more complex property types was also less of a draw than residential, although 26% of landlords plan to purchase Houses in Multiple Occupation and 16% Multi-Unit Freehold Blocks.

Just 6% of landlords said they were planning to trim their portfolios over the next six months an encouraging sign that the rental sector is in good health.

‘Tenant demand for residential property is ballooning thanks to the lack of mortgages available to first time buyers. Every month more and more would be buyers are being forced to rent, and this is pushing up demand to astronomical levels, producing very attractive gross yields for landlords as a result,’ said David Whittaker, managing director at Mortgages for Business.

If you are looking to purchase a new buy-to-let property, then make sure you get specialist insurance from Discount Landlord.