Optimism among UK private property landlords continues to grow

Almost a quarter of landlords in the UK are feeling more optimistic about the prospects for their property portfolios, rental income and yields, according to a new survey.

They are looking to buy more properties to increase their portfolios in the coming year, the research from buy to let mortgage specialist Paragon has revealed.

Its second quarter Private Rented Sector Trends Report, which gives a detailed overview of the PRS sector and buy to let market, shows that 23% of landlords feel more optimistic about the prospects for their portfolios.

Optimism was particularly high amongst professional landlords, with 30% stating they where more optimistic, compared with 15% of smaller scale landlords.

Demonstrating their increasing optimism, on average, landlords expect to have 13.1 residential properties in their portfolios in a year's time, compared to 12.6 properties currently. This is the first time in two years that landlords have predicted an increase in the number of properties in their portfolios.

Rental income is particularly healthy, with three out of ten landlords, 29%, having increased their income during the second quarter, the majority of which reported an increase of between 2% and 4%.

Landlords are also more optimistic about the net value of their portfolios, with a growing proportion expecting an increase in value, 14% in the second quarter compared with 13% in the first quarter. Fewer are forecasting declining values, 12% in the second quarter compared with 19% in the first quarter. And the majority of landlords, 74%, expect net values to remain the same.

Also highlighted in the report was an interesting shift in the types of property that landlords are looking to add to their portfolios during the third quarter. Of those looking to purchase during the quarter, terraced houses are the most popular choice with more than half of landlords saying they expect to buy this type of property.

However, there has also been significant increases in the popularity of semi detached houses, up from 28% to 41%, and detached, up from 9% to 22%.

‘Our report emphasises the fact that there is significantly more optimism amongst landlords in the private rented sector and the buy to let market, and that looks likely to increase during the coming quarters,’ said Nigel Terrington, Paragon Group chief executive.

The report also shows an improvement in the perception of the availability of buy to let finance. Some 22% said that it was reasonably available, compared with 17% in the first three  months of the year.

Yields remain unchanged and healthy at an average of 6.2%. Average weighted portfolio value stood at £1.42 million and average gearing, the level of borrowing as a proportion of the portfolio's value, was 40% during the quarter.

‘Landlords are still experiencing high levels of tenant demand which is set to rise further in the coming quarters. It is encouraging to see yields remaining at a healthy level, low void periods and general confidence across the sector,’ Terrington added.