Buy-to-let landlords to see rise in value of investments

Landlords expect to see their investments&#39 material value increase by almost 7% over the next 12 months, with most expecting to expand their own rental portfolios.

Research into buy-to-let trends conducted by Paragon Mortgages suggests landlords are factoring in a 6.9% increase in house prices to their new investment decisions over the next 12 months. The survey also shows that they expect to increase the size of their rental portfolios by 21%, from an average of nine to 10.9 properties.

Over the last three months, the average size of portfolios has remained unchanged. Over half (52%) of the landlords responding to the Paragon survey hold portfolios of between three and ten residential properties. Typically, novice landlords hold just one property.

Although the popularity of flats as an investment has fallen from 45% to 38%, they still rank second as the most popular property investment type. Terraced houses are in poll position and account for 46% of buy-to-let properties, up from 44% in the last quarter. Meanwhile, the popularity of detached and semi-detached investments has grown from 11% to 16%.

Nearly half of all respondents (44%) have property investment portfolios with a value of more than half a million pounds. More than a quarter (26%) have portfolios valued at between a quarter and half a million pounds and two out of ten (19%) report their portfolios as worth between £100,000 and £250,000. Only 9% of all landlords have a portfolio worth under £100,000.

The survey showed that gross annual rental returns averaged 8.8% for the professional landlord and 7.9% for novice landlords. The average net rental return, excluding finance costs, was 6.3% for the professionals and 5.6% for novices.

John Heron, managing director of Paragon Mortgages, says: “As a specialist buy-to-let mortgage lender, Paragon lending tends towards the professionals in the sector. However, respondents to this survey represent a typical cross section of the buy-to-let market and are a valuable bellwether for the health and direction of buy-to-let in general.”

Void periods have also fallen over the past three months, with the overall average falling from 19.3 days to 17.8 days. However, for nearly half of all landlords (48%) the average void period over a year was less than two weeks, while for a further third these empty periods averaged between two and four weeks.