Alongside elevated purchase levels among owner occupiers, this has bought into sharp focus the issue of long-term undersupply of new homes, compounded by the impact of Brexit and the pandemic on construction.
NAEA Propertymark members reported an average of 19 buyers to each available property on the market.
It appears that the competition for stock could be influencing investor behaviour.
Earlier in 2021, Paragon research highlighted how for the first time in four years, the proportion of landlords who said they plan to expand their portfolios was higher than the slice who intended to reduce.
Our most recent survey of landlords shows that this planned investment trend has now reverted and the proportion who think that they will make no changes to their portfolio sits at 55 per cent, which matches the high seen at the start of the pandemic. Dispelling the notion that this behaviour could be attributed to the tapered end of the stamp duty holiday, our survey also found that 91 per cent of landlords either did not or were not planning to make any changes to their portfolio as a direct result of the tax break.
Investing to add value
Instead of competing for properties being sold, anecdotal evidence suggests that increasing numbers of landlords are investing in upgrading existing properties.
Looking at our own book, we also see that we’re on track to write just under one third more further advance business this year compared to last. As we stipulate that these loans must be used for property purposes, an increase in this type of business, against a backdrop of limited stock, suggests that landlords are borrowing more to spend on existing properties.
And while we should acknowledge that some landlords need to do more to provide good quality properties, it is important to recognise that the majority manage portfolios effectively and really care about the places their tenants call home. Speaking to both landlords and tenants, we know that the majority have good relationships, which have been strengthened by the support many landlords have provided during the pandemic, and investment in properties is more common than critics of the sector may realise.
Surveys show us that nearly four in five landlords spend an average of £8,720 each on upgrading property after purchase.
Even so, the tangible improvements seen in PRS stock over the past 10 to 15 years – rented homes are now newer, larger, warmer and more energy efficient – can primarily be attributed to new properties being bought into the sector, diluting the older stock. Much of this has been funded through buy-to-lending and although current market conditions mean that there may be fewer landlords turning to lenders to finance an injection of new stock into the sector, there seems to be a growing place for products that facilitate an improvement in that which already exists.