It’s easy to picture thousands of eager first-time buyers or second steppers counting down the days and frustratedly pushing conveyancers who are snowed under by the current workloads. However, a decent proportion of these purchases are also being driven by landlords and investors who have identified opportunities to extend their portfolios.
The past six months really have underlined the continued appetite for homeownership across the UK but it’s also important to realise just how important the private rented sector remains for a growing percentage of the UK population. There has been a clear upturn in tenant demand in the second half of 2020 after restrictions on the housing market were lifted. A fact which was highlighted in research from Paragon Bank which suggested that tenant demand reached a five-year high in Q4 2020.
Data collected by the lender showed that 32% of landlords reported increasing levels of tenant demand during the final three months of the year, the highest level since Q1 2016. This figure was up from 29% reported in Q3 2020 and 25% recorded in Q4 2019. On a regional basis, the number of landlords suggesting the greatest rise was in the South West, with 58% outlining an uptick. This was followed by the West Midlands, with 48% of landlords reporting an increase in demand. In contrast, just 10% of landlords in Central London outlined a rise in tenant demand.
Despite these increases, 64% of landlords said they have no plans to change rental prices, 15% said they will increase rents and 9% intend to lower them. In addition, landlords said they felt more confident about rental yields, their capital gain, the UK private rented sector and their own letting business than they did during the same period in 2019. Overall, 35% of landlords rated the prospects for their own lettings business as good or very good during Q4 2020, compared to 30% in the previous quarter and 31% during the same period in 2019.
Although the fundamental principles underpinning the private rented sector remain, there’s no getting away from the fact that we are operating in a slightly different BTL world with the wants and needs of tenants having shifted to meet remote working, home-schooling and general lifestyle demands. Having said that, despite talk of a mass exodus from urban districts, additional research from Paragon showed that over two-thirds of landlords will continue to look for property in such areas for their next portfolio purchase. 36% plan to buy in a suburban area and 6% are looking at rural locations. 66% of landlords said they plan to buy in the same area as their existing properties, with 10% targeting new areas. 20% said it would be a mixture of both.
This data reflects how the BTL sector is reacting to this challenging period. It also helps outline that a considered approach to property investment and a focus on long-term trends rather than short-term sentiment remains the most prudent tactic for landlords going forward. And long may this continue.
