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Landlords are in it for the long term

Capital growth has always been seen as a key motivation for investing in buy-to-let properties, prompting some commentators to ask what today’s decreasing HPI environment means for the future of buy-to-let.

But what our landlords are telling us is that the current fall in house prices will have little impact on the appetite of most buy-to-let investors because while capital growth remains as important as ever, the majority of landlords are in it for the long-term and have no plans to sell either now or anytime in the near future.
Those investing in buy-to-let generally tend to fall into two camps – professional landlords running their property portfolio as a business, and those looking to invest in buy-to-let as part of a balanced investment portfolio designed to supplement their retirement planning.
At a time when rents are not only stable but rising, and house price falls mean increased rental yields, professional landlords in particular will be looking to take advantage of the good buying opportunities available in the market. While many of those who are looking to buy-to-let as a means of supplementing their income in retirement may be more cautious about expanding their portfolios at present, others will simply be holding out for the bottom of the market before looking to follow their professional counterparts.
Our survey of more than 7,800 buy-to-let investors earlier this year supports the view that planning for the future is the key motivation driving landlords, with 52% citing capital growth as their main reason for investing in buy-to-let and nearly half (46%) investing to provide for their retirement. Just 12% said they were investing in buy-to-let as a means to supplement their existing income, a clear sign that most landlords are not in it for short-term gain.
While house prices may have further to fall over the coming months, the current constraints on mortgage funding have done nothing to diminish the underlying imbalance between property supply and demand in the UK and HPI is expected to recover over the next few years. Furthermore, the fundamentals that have driven the rental market over the last decade still remain. For professional landlords in particular therefore, falling house prices simply mean good buying opportunities that offer them strong rental yields and the prospect of long-term capital growth.

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