Landlords remain committed to property investment

Average rents reached a new peak of £11,886 in February, up from £11,604 in January, according to Paragon’s latest Buy-to-Let Index.

As demand for rented accommodation continues to grow in a more difficult environment for home purchase, landlords are able to achieve higher rents and yields both on their existing rental properties and on additions to their portfolios. Rents have risen by 2.4% since last month and 5.2% over the past quarter, while yields stand at 6.3%, compared with 6.0% three and six months ago.

The private rented sector remains dominated by the large scale investor, with 13% of landlords owning 100 properties or more, representing around three-quarters of the private rented housing stock. According to research from Communities and Local Government, 97% of properties are held by landlords who own five properties or more.

John Heron, Paragon’s director of mortgages, says: “Large scale landlords dominate buy-to-let, and they have a very different view of the market from the short-term speculator – some of whom invested without a great deal of thought in new build properties, which they may now be having to sell into a more difficult market. Serious landlords take a long-term perspective based on the underlying dynamics of supply and demand. They only invest in properties for which they know there is proven demand and which will generate an adequate return. There is no evidence that this class of investor is spooked either by the credit crunch or by the uncertain outlook for house prices.”

Heron continues: “The message is clear - experienced landlords continue to regard property investment as a sound business, providing as it does a roof over the heads of those people who through choice or circumstance rely on the private rented sector for their accommodation needs. They hold their property investment assets for more than 10 years, and decide to buy or sell based on sound commercial considerations rather than short term signals in house prices or economic sentiment.”