Confidence still high
We surveyed 8,000 landlords for their opinions on the buy-to-let sector and found them in an optimistic mood
Some commentators have been gloomy about the state of the housing market over the past few months and it’s true to say that the effects of the credit crunch can now be seen in every part of the economy.
To assess how landlords are really finding conditions, and to discover their views on the prospects for the buy-to-let sector, we commissioned GfK NOP to carry out an independent survey of our customers. It was the UK’s largest survey of landlord opinion — involving 8,000 landlords — and it found them surprisingly upbeat.
More tenants
It’s true that the UK economy has suffered from the credit crunch and, in the mortgage sector, banks and building societies have tightened their lending criteria to such an extent that the Government has seen fit to comment on the subject.
However, our survey shows once again that landlords understand market conditions and remain positive about the future. Many still plan to maintain or increase their property portfolios. Rent levels are encouraging and there is still a significant pool of tenants, which is continuing to grow in the current climate.
First-time buyers are, of course, finding it harder than ever to get a mortgage and many are seeking to rent until the prospects improve. As recently as the economic slowdown of the early 1990s, such people faced the prospect of renting property with no guarantee of quality or protection for them as tenants.
However, the advent of buy-to-let has revolutionised the market and introduced choice to investors and tenants alike. Year on year it has developed into the thriving sector it is today and now represents an important alternative for people looking for accommodation who may either find it hard to source a mortgage, or choose not to have one.
The Association of Residential Letting Agents’ (ARLA) quarterly survey largely agreed with our own customers’ positive view of the market. It found that average weighted rental returns for houses and flats had increased by 5%. In the South East, achievable rent levels saw a 10% increase in three months and demand for rental property continued to outstrip the supply with six out of 10 landlords saying there were more tenants than properties.
Our results
Our own survey showed that, despite the current economic climate, 90% of landlords were still planning to maintain or increase their portfolios in the next six months. That’s an increase of 4% over the previous results at the end of 2007, and once again only 1% say they are planning to leave the market.
And it’s clear that demand for rented property has ensured that rental levels have remained stable, with 97% of respondents (an increase of 8% on our previous results) stating that they have either stayed the same or increased. Reassuringly, 98% believe this will continue to be the case for the next six months.
With more people looking for rented accommodation, the number experiencing unplanned void periods had fallen by 5% to 23% in the six months before the survey and the number of landlords experiencing no voids increased by 7% to 65%.
Tenant profile is similar to previous surveys with the majority (44%) being couples, although there was a slight increase in the number of singles and families opting to rent. This suggests that the idea of renting to fit in with lifestyle is becoming embedded and points to the importance of decent properties to rent when securing a mortgage becomes more difficult.
The majority (63%) of landlords who responded to our survey were aged between 35 and 55 and had been investing for five years or more (59%). Most are either employed or self-employed (77%) and they are investing to provide for their pension (46%) and for capital growth (52%).
Because of the recent media interest in new-build properties and whether they could be easily let, we asked landlords what proportion of their properties fell into the ‘new build’ category. The majority (59%) had none at all, suggesting that experienced landlords are sticking to tried and tested properties that they know they can let.
The survey also found that 60% of those landlords questioned had terraced houses in their portfolios, 50% had two-bedroom flats and 38% had one-bedroom flats and semi-detached properties.
Buy-to-let succeeding
This is a significant set of results that is supported by the latest data from ARLA’s Review and Index, which shows, for example, that the average loan to value (LTV) ratio of residential portfolios is now 57%.
These figures, coupled with an evident increase in demand due to lifestyle choices and economic drivers, prove beyond doubt that buy-to-let is not just holding its own in troubled times. It is poised to become even more important to the health of the UK’s housing market.
“90% will maintain or grow their portfolios”
Figure 1. What are your portfolio plans over the next six months?
Figure 2. Compared with 12 months ago, is the rent for each property:
Figure 3. What do you expect rent levels to do over the next six months?
Figure 4. Over the past six months, have you experienced any void periods?
Figure 5. What are your reasons for investing in buy-to-let?
Figure 6. What property types are in your portfolio?
