The intent by landlords to add to the number of properties they let comes despite any perceived increases in tenant demand being at the lowest level for three years.
At the end of 2011 52% of landlords were reporting an increase in tenant demand, compared to 35% in Q4 2013. However, a much greater proportion are reporting ‘no change’ in demand, with stability further reinforced in the market’s profitability profile.
Some 80% of landlords are continuing to make a profitable full time living from letting, with 76% of amateur landlords able to supplement their ‘day job earnings’ with the portfolios providing a return beyond the breaking even.
The research also revealed that an average amount owed by tenants in arrears has fallen to a new three year low of £1,499.
Phil Rickards, head of BM Solutions, said; “While there will always be elements of the rental market that fluctuate, overall stability will continue to ensure that lettings attract both professional and amateur landlords. By increasing portfolios landlords are also able to further spread the risk of void periods and tenants in arrears, which is important when considering the long term investment rather than focusing on the short term gains.”
A third (34%) of landlords reported at least one void period over the past three months, a decrease of 2%, with the average void duration falling by five days to 59 days since the previous quarter. Landlords with larger portfolios were more likely to be able to cover the cost of a void period with the profits from other properties, rather than relying on savings or day job earnings, providing another potential motivation to increase portfolios.
Confidence in the buy to let sector has fallen slightly from the six year high reported last quarter, with 63% of landlords confident in the prospects for the future (down from 68%). However, optimism around capital gains and the broader economy is continuing to increase.
Reliable rental yields
Over the past quarter, the average rental yield in the UK was static at 6%. In comparison, the average rental yield was 6.1% in Q1 and Q2 2013. Three in five (59%) landlords raising rents did so when new tenants arrived, with over half (53%) doing so to bring their pricing in line with the local market. The strongest performing region was the North West achieving a return of 6.4%; with the London and the South West seeing the lowest returns at yields of 5.6%.