Buy-to-let landlords’ confidence in their investment is at its highest on record, despite five interest rate rises in the last 12 months, because of supply and demand, according to trends noticed by Paragon Mortgages.
The buy-to-let sector is experiencing renewed faith amongst its investors, who intend to add to their portfolio in the near future rather than downsize it. The research comes from an index based on the value of property portfolios now and the expected value of them in 12 months time – it now stands at 160, up from 155 for last quarter, and 150 from this time last year.
Tenant demand has been outdoing supply, so it’s a landlord’s market and they can put up rent in order to recompense the rising interest rates that are pushing up their mortgage premiums.
With the slowing property market, buy-to-let landlords are in a strong position to charge higher rent, and in February 2007, they were making an average yield of 6.1% on their rented property which has risen to 6.3%. This means that not only are landlords able to pay their mortgages, but the returns from the investment remain positive.
Landlords for whom the buy-to-let market is their livelihood have also taken advantage of the slowing house prices to add to their portfolios and increase their profits even more, and many intend to do so over the next 12 months. The average number of properties is expected to rise from 11.5 (compared to 11.1 in February), to 12.5 at this time next year.
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.”
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