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Published: 09/10/2018
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Landlords have come under immense scrutiny in recent years, but there's one aspect in which they can still rejoice – the increasing value of their investment. Indeed, largely thanks to a robust housing market, the average value of landlords' investment property has reached a record high of £1.7m, according to the latest PRS Trends survey from Paragon.

The data shows that portfolio values have climbed fairly consistently since the financial crisis, despite some fluctuations along the way, with rising house prices and landlords' desire to build their portfolios serving to push the value of their investment to new highs.

Tenant demand remains heightened, too, with an overwhelming 84% of landlords continuing to report stable or growing demand for rental property, as tenants continue to rely on this sector of the property market. Not only that, but void periods remain low – the typical property remains vacant for an average of just 2.9 weeks a year, remaining within the long-established range of 2.5 to 3 weeks.

Yet despite such a relatively strong foundation, recent Government intervention is undoubtedly taking its toll.

Government pressure

In recent years, several legislative changes have impacted the buy-to-let (BTL) sector, such as the various tax changes (including the stamp duty surcharge and changes to tax relief) and the new affordability rules impacting professional landlords. The changes have impacted the profitability of many portfolios, which has seen some landlords sell-up in response.

Indeed, typical residential landlords now have an average of 12.6 properties in their rental portfolio, which although marks a slight uptick from the previous quarter, is some way below the peak of 14.9 properties in 2014. Furthermore, twice as many landlords (21%) say they are more likely to sell property in the next quarter than buy (9%), suggesting that portfolio size could begin to waver going forwards.

Landlords are feeling progressively less optimistic about the prospects for their portfolio, too, with just 12% of landlords now saying they feel optimistic, compared with 41% in 2014. Many are similarly pessimistic about the private rented sector in general, returning an average score of 6.3 out of 10, close to the record low of 6.1 recorded at the start of the year, as the after-effects of tax and policy changes continue to impact sentiment.

"While it would be understandable to expect record portfolio values to have fed through to a feel-good factor among landlords, what we're seeing is closer to the opposite," said John Heron, managing director of Mortgages at Paragon. "Landlords are less optimistic about the future than at any time since 2010. Even assuming they maintain their portfolio at its current size, more expect to see a drop in value over the next 12 months than those who anticipate an increase.

"The UK's private rented sector is home to one in five households today and RICS predict we will need another 1.8m rental homes by 2025. However, if landlords don't begin to feel more optimistic about the future, it's difficult to see where this investment will come from."

An uncertain future

It's difficult to know what will come next for the private rented sector, but with millions of individuals relying on it for a place to live, it could still be a viable investment. Indeed, with tenant demand high and void periods low, not to mention other reports highlighting the continued profitability of the private rented sector, opportunities remain for those seeking to find another income stream – and the right buy-to-let mortgage is central to the whole endeavour.

If anything, choosing the best mortgage is more important now than ever before, particularly with landlords needing to keep stringent tabs on their outgoings to ensure their portfolio remains as profitable as possible. First-time landlords in particular need to make sure they're choosing wisely, which is where the right advice, and the right comparison tool, comes in.

Start the process by using our buy-to-let mortgage calculator to see the kind of options available to suit your circumstances, or check out the best first-time buyer mortgages for a general overview of the options. Make sure to seek the right advice as well, however, to ensure buy-to-let is the right path for you and your needs.

Get extra support by reading our buy-to-let guides


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