Landlord Strategy for 2015
Confidence amongst landlords is high at the start of 2015. Demand for rental properties remain high and the returns to be made by investors and buy-to-let landlords are correspondingly good. For landlords the option to continue to invest and further expand their collection can be a far more profitable move than placing their earnings into a savings account at a time when interest rates on bank and building society accounts are minimal. Mortgages specifically for buy-to-let investments provide record low borrowing rates at present.
All of this means that landlord strategy in 2015 looks to be based on taking advantage of mortgage deals to invest in additional rental properties – or to re-mortgage existing portfolio properties with an eye to making further purchases. A report published by the National Landlords Association (NLA) in November of 2014 suggests that 31 per cent of all landlords asked will be looking to purchase further properties in the next 3 months.
Moreover, a report released by the letting agents PropertyLetByUs suggests that over half of landlords are planning to buy more properties in 2015 – a result of high rental returns for landlords and falling rent arrears over the past year. The survey by the letting agents showed that 50 per cent of landlords had seen yields of between 6 and 8 per cent on their investments in the last 12 months, and 10 per cent of landlords asked had managed to achieve yields of over 8 per cent on their properties. With the increases in property prices the value of landlord assets has further grown – the loan to value ratio reported by a third of the surveyed landlords was between 30 and 40 per cent.
Within the housing market and wider economy there are various dynamics keeping rental demand high – wage increases are far beneath increases in property prices; more and more young professionals aspire to rent city-centre properties in redeveloped areas; and the idea of owning a home as a vital component of family life within Britain is not as strong as it once was. More and more families and older people are more content with renting rather than owning their home.
Nevertheless, not everything is stacked in the favour of landlords. The research of the NLA revealed that one in five of those surveyed had encountered difficulties in gaining buy-to-let mortgages in the past 12 months. This amounts to 300,000 landlords who have been unable to expand their portfolios as they would have liked. Over half of those surveyed also believed that current lending criteria were too restrictive and conservative – a barrier to more positive investment within the marketplace.