Buy-to-let investors increased their portfolios by 4.2% in Q4 2009, compared to Q3, shows the latest Paragon private rented sector trends report.
The average portfolio size increased from £1.37m in Q3 to £1.43m in Q4 2009.
On a three quarter moving average basis, this was the first increase since the corresponding quarter in 2008.
Looking forward, taking into account both changes to property values and sales and purchases, 21% of landlords expect to see their portfolio value increase over the next 12 months, compared to 8% who expect values to fall.
The remaining 71% believe that their portfolio value will remain stagnant. Overall, landlords expect the average value of their portfolios to be 2.1% higher at the end of 2010.
Yields also strengthened in Q4 after falling in the third. The average yield across landlords’ portfolios was 6.2% for the period, up from 6.0% in Q3 of the year.
But landlords expect yields to be largely flat over the next 12 months, ending the year at 6.1%.
There are also regulatory concerns among landlords, nearly six out of 10 landlords said they were worried about the level of regulation required in relation to the running of their property business during the year.
With buy-to-let lending levels subdued and mortgage product availability limited, landlords also expressed concerns about how they will fund property purchases in 2010, with 37% stating that they were worried about this.
The buy-to-let sector is marked by a lack of competition, with just two lenders accounting for an estimated 90% of current new business.
Nigel Terrington, chief executive of Paragon Group, says: “Landlords enjoyed a strong end to the year and enter 2010 with a solid platform on which to build. Last year was one of stability after the volatile events of 2008 – arrears declined, tenant demand grew, rental incomes strengthened and the spike in supply caused by ‘accidental landlords’ – those homeowners forced to let their property because they were unable to sell – started to subside.
“Landlords also reported growth in the value of their property portfolios, whilst the level of tenant arrears fell. Confidence in property investment can be seen in the number of landlords looking to expand their portfolios this year. PRS Trends shows that one in 10 landlords is planning to purchase in the first quarter of 2010, but unfortunately investors continue to be hampered by a lack of available buy-to-let mortgage finance.
“The recovery of the buy-to-let lending market is largely dependent on the recovery of the wholesale funding markets, and it was encouraging to see a handful of successful residential mortgage-backed securities deals completed in the latter half of the year. We now need to see momentum in the number of new issues, and only then can we truly say that we are emerging from the credit crunch.”