Landlords are still investing in property – Landbay

by: Paul Brett, managing director, intermediaries at Landbay
  • 19/05/2022
  • 0
Landlords are still investing in property – Landbay
You may have seen some news articles saying that landlords are leaving the industry, but let’s put that into context.

The private rented sector (PRS) makes up around 20 per cent of the UK’s housing market with about 13 million people living in rented accommodation and has more than doubled over the past two decades. Research firm Statista says there were two million privately rented households in 2000, rising to 4.43 million in 2021.

With the home rental boom came an increase in the number of landlords. HMRC data shows landlord numbers have risen by 52 per cent in eight years from 1.75 million in 2013 to 2.66 million in 2021.

 

Different types of landlords

The majority of landlords, 64 per cent, own between one and three rental properties, according to research by the London School of Economics on behalf of the National Residential Landlords Association.

The report, published in November 2021, shows that within this cohort, 32 per cent of landlords own one property, 19 per cent have two and 13 per cent own three. The other 36 per cent are portfolio landlords with four or more properties.

So, there is a wide range of landlord types from the amateur to the professional and those who are somewhere in between.

There is also an almost equal split between male and female landlords. The latest statistics from HMRC are a little dated but show that 48 per cent of landlords in 2018/19 were women. Between 2014/15 and 2018/19 tax years, the number of female landlords rose by 17 per cent to 1.25 million while the number of male landlords increased by 10 per cent to 1.38 million.

The attraction of property investment is that it can be a lucrative business, not just by generating monthly income and profit, but also as a long-term investment as you would expect property to rise in value.

Let’s take the years mentioned above. The ONS house price index shows the average house in December 2013 was valued at £177,971 rising to £274,712 in December 2021 – that’s a 54 per cent increase in eight years.

 

Busiest Q1 for buying rental property since 2016

Landlords buy and sell properties all the time and the start of this year has been the busiest in six years. The first three months of 2022 have been the most active Q1 for investors buying property since the three per cent stamp duty surcharge was introduced for second homes in 2016.

Research from Hamptons estate agency found that 13.9 per cent of properties sold were bought as buy-to-lets in Q1 2022, up from 12 per cent in Q1 the year before. The share of homes sold by investors fell from 14 per cent to 10 per cent in the same period, the lowest proportion in 10 years. The peak was in Q1 2016, as people rushed to beat the stamp duty hike – 15.9 per cent of homes sold were for rental purposes, and it has hovered around the 10 per cent mark ever since.

There has also been a rise in the number of properties sold by landlords and bought by other landlords. During Q1 of this year, 41 per cent of homes purchased by investors had previously been let and this has been rising steadily since 2018, when it stood at 25 per cent.

 

Strong rental demand

While it is true some landlords are selling up, there is strong evidence that buy to let is still popular and I believe it will continue to be as rental demand rises. Letting agents are reporting fewer properties on their books, yet more people are looking to rent and struggling to find accommodation.

The estate agency membership body, Propertymark, said the average letting agent had 142 applicants registered on their books in February 2022, a 73 per cent increase year-on-year. However, there were only five newly listed rental properties on average in each letting branch, which is 44 per cent down on a four-year average of nine.

The UK has a housing shortage and demand has always outstripped supply, whether that is for owner occupation, privately rented or social housing. Even if some landlords decide to leave the PRS there will always be others to take their place. Professional landlords, in particular, are expanding their portfolios and first-time landlords are venturing in too.

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