Landlords resizing, reducing gearing and increasing rent

by Property 118

A month ago

Landlords resizing, reducing gearing and increasing rent

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Landlords resizing, reducing gearing and increasing rent

Landlords with between 6 and 20 properties in their portfolio have increased from 35% to 39% of those surveyed according to Paragon’s latest PRS Trends research, based on interviews with 203 experienced landlords in Q1 2018.

This follows a drop in the proportion of landlords in the 3 to 5 property bracket at the end of 2017, down from 26% to 24%, and indicates the potential for a growing polarisation between small scale landlords and those with more substantial portfolios.

Landlords at the top end have also been resizing, with the latest survey recording a fall in landlords with over 50 properties, down from 6% to 4%, and an overall reduction in the average portfolio size from 13.1 to 11.6 properties.

Portfolio resizing appears to be one of a variety of tactics being adopted by landlords to adapt to regulatory and fiscal changes in the buy-to-let sector, with reductions in portfolio gearing and rent increases also playing an important role.

Average portfolio gearing which measures the loan to value ratio of a property portfolio, reduced from 35% to 32% compared with three months ago, falling from a peak of 43% in 2012 to hit its lowest level since Paragon’s PRS Trends survey began in 2001.

Meanwhile, almost a quarter (24%) of landlords reported that they had increased rent in the last three months. They also said they were spending an increased proportion of their rental income on mortgage costs, up to 30% of income from 26% at the end of 2017.

John Heron, Managing Director of Mortgages at Paragon said:

“Our latest survey demonstrates how tax and regulatory changes are beginning to drive changes in landlord behaviour, with evidence of polarisation between small landlords and those with more substantial portfolios beginning to emerge.

Our own experience highlights that landlords with larger portfolios need access to products that cater for landlords with more complex requirements and broader underwriting expertise, increasing the role for specialist lenders in the buy-to-let market”

Click Here to read the full PRS trend report Q1 2018



Comments

Just got an email update from Property Wire. Apparently:
"The research from think tank the Resolution Foundation said that up to a third of millennials will not be home owners and radical reform is needed in the private rental sector to accommodate them.
It suggested that there should be new tax reforms to discourage multiple home ownership and better support home ownership among the young, along with support for councils to get more affordable homes built."
I am not sure if there is a thread here when it can be better posted, but another round of taxation is going to kill the sector completely.
What do the others think?


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