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Category: property market
A survey by Paragon Bank reveals cautious optimism from portfolio landlords for the year ahead, driven by high levels of tenant demand; and outlines property investment tactics they plan to use to achieve growth.
Paragon Bank surveyed nearly 400 portfolio landlords to assess sentiment for the year ahead, investment plans and the factors fuelling purchasing decisions.
Why are portfolio landlords planning to buy?
An overwhelming 92 per cent of landlords surveyed believe tenant demand will be sustained into 2024, which is the main factor driving their confidence in the private rental market.
The decision to invest is most strongly driven by the benefits of long-term capital gains (58 per cent), from the increase in property values.
Other strong influences include the desire to generate a pension income (54 per cent), to turn property investment into a main source of income (48 per cent) and for additional monthly income (43 per cent).
Each factor implies the gradual evolution towards achieving financial freedom through property.
Tactics for investment
More than one third of the survey respondents expect to invest in additional properties in 2024. The tactics intended to buy more property include using funds from savings (58 per cent) or to release available equity from other portfolio properties (55 per cent).
61 per cent of landlords will use mortgage borrowing to buy new property, with fewer (39 per cent) planning to buy outright. Using a mortgage can make cash funds go further. For example, a pot set aside to buy one property might be split in half to buy two or more, depending on the property price and maximum loan to value.
By gearing a portfolio in this way, it can be possible to make a given sum of money work harder in generating an income from multiple rents.
Where is comes to the type of property portfolio landlords intend to invest in, a large proportion are looking at diversification, with plans to buy something other than they already have in their portfolio. 43 per cent of survey respondents said this was their intention.
20 per cent of respondents plan to change their geographic approach, by looking at new regions of the country to buy in, from their existing investments.
With a cautiously optimistic sentiment unveiled by the survey, this diversification may be a tactic to mitigate against risk.
What type of properties are portfolio landlords intending to buy?
Terraced houses (52 per cent) and semi-detached houses (46 per cent) came out in front as the property types of choice for future purchases.
Flats (26 per cent), detached houses (24 per cent), Houses in Multiple Occupation (21 per cent), properties converted into HMOs and Multi Unit Blocks (19 per cent) came in third to seventh respectively.
What’s more, portfolio landlords showed their confidence in renovating property, with 55 per cent intending to buy property in need of refurbishment, versus 13% intending to buy property ready to live in, and 32 per cent open to property of any state.
How will landlords approach increasing rents?
41 per cent of landlords said they increase rents annually by default, where 21 per cent did so when costs they incurred rose. 20 per cent increased rents every few years, but some kept the rent the same until a new tenant took up occupation (14 per cent).
The factors influencing what level of rent to charge included, local rents (69 per cent), mortgage rates (56 per cent) and to a lesser extent CPI/inflation (34 per cent).
What impact did the scrapping of EPC legislation have?
The private rental sector as a whole, including mortgage lenders and landlords alike, geared up for proposals from the government to increase minimum Energy Performance Certificate (EPC) requirements for properties within the rental sector. However, Rishi Sunak scrapped these plans in September 2023.
Given this reversal, which was set to cause a significant degree of cost to landlords, Paragon included questions on this subject in their survey.
Perhaps surprisingly, given the rise in other costs landlords also face, 37 per cent said that they would continue with plans to get their properties up to an EPC grade C where they could (which was the level put forward to be achieved in the since reversed proposals).
32 per cent of those surveyed said they were in the happy position of already achieving an EPC grade C or above across their properties.
Of those doing works to meet a C rating, 46 per cent said it would be completed within two years or less.
Whatever the size of your portfolio, Commercial Trust supports all landlords in finding suitable property investment finance solutions, contact us today to discuss your needs.
