Landlords see jump in portfolio values

Landlords’ portfolio values have risen for two quarters in succession for the first time since the first half of 2008.

The value of residential property investors’ portfolios reflects the general improvement in UK house prices, according to research from Paragon Mortgages.

John Heron, managing director at Paragon Mortgages, says: “Confidence amongst the landlord community has grown in recent months and that is reflected in portfolio valuations.

“According to the National Landlords Association, landlord confidence is at its highest since 2007.

“On the whole, house prices have been rising since the middle of last year and we know that landlords have taken advantage of a more fluid housing market to add properties to their portfolios.”

Paragon’s Trends research shows the average value of landlords’ portfolios jumped 6.1% during the first three months of 2010 to £1.52m. The rate of growth accelerated during the quarter and was up from the 4.2% growth recorded during the final quarter of 2009.

The figure takes into account both changes to property values and sales and acquisitions, which suggests landlords have been adding property to their portfolios or replacing existing stock with properties of higher value.

This is the first time portfolio values have increased for two quarters in succession since the first half of 2008, a period when house prices were starting to slip but buy-to-let mortgages were still widely available and landlords were able to finance purchases.

Heron adds: “Looking forward, more landlords believe that portfolio values will rise than fall, but the vast majority are unclear about which way house prices will move.

“There are a number of variables that will influence house price movement, but access to mortgage finance for the market as a whole will be key.”

Landlords expect the average value of their portfolios to be 1.2% higher at the end of the first quarter next year than at the end of the equivalent period this year.

The majority of landlords, some 73%, believe values will be stable over the period, but of those forecasting movement 19% believe values will rise compared to 8% who forecast a fall.