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Landlords look to double buy-to-let portfolios - Mortgage strategy
Rebecca Atkinson - 12-Oct-2005
The Money Centre has revealed the results of its landlord survey for Q3
of 2005, which show a positive outlook for the buy-to-let market as
landlords look to double the amount of properties in their portfolios
this year.
On average, landlords are planning to purchase three properties in the
next 12 months, compared to just two in the same survey last year. And
their outlook for the property market in general is also positive.
An overwhelming 84% are confident that property values and rents will
increase, compared to 62% last year, while the remaining 16% thought
property values and rent would remain the same. Not one of those
questioned predicted value or rent decreases this year.
Landlords expect the base rate to hover at 4.76% until 2010 compared to
last year’s prediction of 5%. This outlook is influenced by the base rate
cut earlier this year, which has helped landlords to grow their
portfolios over recent months.
The average number of properties owned is up from seven in 2004 to 11 in
Q3 of 2005, which equates to an average 57% increase in portfolio growth.
Those landlords with an average property worth of £101,000 – 200,000 is
up from 54% in Q3 of 2004, to 64% this year. And with landlords also
borrowing more than last year the average loan value is up from 51% to
53% this quarter. The average yield on rental properties has remained
constant at 6%.
Mark Alexander, managing director of The Money Centre, says: "Landlords
are upbeat about their buy-to-let portfolios and the property market in
general. The market has stabilised and levelled out this year whereas
last year there existed an air of uncertainty with landlords looking for
security with flexible products.
"Now the market climate has changed, due to the decrease in the Bank of
England base rate earlier this year. More competitive products have
become available and landlords are now more interested in obtaining the
best loan terms possible, allowing them to borrow the maximum available.
"This shows more landlords are pursuing the best strategy for successful
investment, borrowing the maximum and investing as little personal
finance as possible to make maximum returns in the buy-to-let market."
The make-up of landlord’s portfolios is also changing. Fewer landlords
are inclined to invest in flats this year, with a 6% decrease on last
year. Houses are still the most popular investment choice, with an 8%
increase in popularity meaning half of buy-to-let landlords looking to
invest are after a house. Landlords are also increasingly looking to rent
to professional tenants – 84% prefer this type of tenant, with just 8% of
landlords preferring student tenants.
Alexander adds: "The fact that landlords now prefer to invest in houses
for professional tenants proves the property market in the UK is becoming
more European. First-time buyers continue to be priced out of the market,
forcing them to rent good quality housing instead, and landlords are
wisely capitalising on this and enhancing the returns on their buy-to-let
investment."
More landlords are now using a specialist broker to arrange financing of
their portfolio. 84% of landlords now use a specialist broker compared to
71% in 2004. But while more landlords are using brokers, the number
hiring a property manager is decreasing with landlords preferring to
manage the properties themselves.
In 2004, 50% of landlords managed their own properties; this figure is
now 64%. But the number joining their local landlords association is
down, from 17% in 2004 to 8% in 2005.
Alexander says: "Experienced buy-to-let investors realise the worth of
placing their investment in the hands of specialist, professional
brokers, who are able to obtain the best loan deals for them and give
guidance on releasing equity to further the development of their
portfolio.
"The fact that more landlords now choose to manage the properties
themselves may indicate that buy-to-let investors are embarking on
investment as a full-time career. However, it does concern me that such a
small percentage of landlords are a member of their landlords
association.
"At The Money Centre, we would always guide our clients to becoming a
member of their association, as they provide invaluable advice and
support in the region in which landlords are investing."
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