Landlords expect another year of growth in 2005, with numbers of properties owned expected to increase by 5 per cent over the next 12 months says Paragon Mortgages.
Professional landlords buy in response to identified tenant demand and recent signs of a more positive trend in landlord rental incomes as recorded by RICS and Paragon Mortgages seem to suggest an increase in demand for rental properties.
According to Paragon figures, landlord rental incomes have risen over the past three consecutive months to reach an average of over 10,000 for the first time and 88 per cent of landlords now believe that demand for residential property is either stable or growing.
Paragon Mortgages managing director John Herson says the recent slowdown in the owner occupier housing market has had a positive impact for buy-to-let landlords. Demand for rented accommodation is rising as many potential buyers put off the decision to purchase in an uncertain market, and this is putting upward pressure on rents.
Paragon research found that although people typically leave the home at age 20, only 60 per cent succeed in buying their own home by age 30. With an acute shortage of social housing the private rental sector is filling the accommodation gap, giving rise to sustained rental demand. The long term demographic and social trends of the UK wont change. This all means that the private rental sector will continue to be buoyant. Although further interest rates are unlikely, owner-occupiers are likely to remain cautious as long as a further reduction in house prices appears possible.
Heron says: “Lower house prices in the owner-occupier market, also give the market savvy professional landlord the opportunity to negotiate better deals on properties than in the over-inflated market of spring 2004. The slowdown in the housing market since last summer means that a number of speculators and small-scale investors may take steps to liquidate their portfolios. However, for the serious investor buy-to-let is a long term investment and there has been no sign of significant selling activity among professional buy-to-let investors. The fact that, according to the ODPM, almost three-quarters of rented housing stock is owned by a mere 13 per cent of landlords, suggests that the disappearance of the speculative investor should have little effect on the wider buy-to-let market.”