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Landlords are starting to feel a squeeze on rental profits despite rising rents, according to a new study.
The number of buy to let landlords with large portfolios of 20 or more rental homes making a loss soared to 8%, says the research for the National Landlords Association.
The findings for the last three months of 2011 showed the biggest rise in portfolio landlords making a loss since records started in 2006. Only 1% reported a loss in the third quarter of the year.
While portfolio landlords enjoyed higher rental yields than other landlords, at 7%, average rental yields for all landlords fell in the last quarter of 2011to 5.9% from 6.7% in the previous three months.
The end of 2011 saw rental yields for all landlords fall to their lowest level in the year despite almost half (46%) of landlords increasing rents in the year and a third (34%) planning rent hikes in the first six months of 2012.
Voids – the time rental properties stood empty – fell five points – from 41% in the third quarter of 2011 to 36% in the fourth quarter.
Mark Long, director of BDRC Continental, the firm conducting the research, said: “In a difficult economy a larger portfolio of property brings greater exposure to risk and those landlords are clearly feeling the impact of rising costs and a decline in profitability.
“This is the highest level we have seen of landlords with 20-plus properties making a loss, and the biggest increase between one quarter and another. In previous waves of the research the highest figure of loss making for this group was 4% in the third quarter of 2009. Some landlords are clearly feeling the pinch.”
Despite a drop in profits, landlord sentiment remains upbeat, with 80% reporting that they feel positive about the prospects for buy to let.
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