Rental price growth is likely to slow this year, with supply set to grow as private landlords – dubbed a ‘rag-tag army’ – invest more.
The rag-tag label is from Rightmove, which says that new landlords are entering the market and existing ones investing to expand their portfolios. It compares them with more strategic institutional investors.
It says that even ‘accidental’ landlords are getting serious, with one in eight expecting to buy an additional investment property this year, completing the transformation from ‘credit crunch casualty’ to active buy-to-let investor.
The proportion of ‘virgin landlords’ looking to invest for the first time is at its highest level for more than a year, while 74% of existing landlords are set to make further investments.
All, says Rightmove, are tempted by sustained tenant demand and an attractive return on investment, expecting gross yields of around 5%.
Miles Shipside, director of Rightmove, said: “Buy-to-let investors will provide much-needed supply relief to ‘generation rent’. A marketplace where landlords are achieving satisfactory returns will relieve some of the supply pressure, although the task seems to be falling on the comparatively rag-tag army of private landlords rather than more strategic institutional investment.”
Rightmove says that while the pool of landlords is growing, it is changing in composition. It says that a feature of the rental market over the last few years has been the rise of the accidental landlords – someone who ends up letting a property out as a result of a moribund sales market, rather than through design.
Rightmove says its latest research indicates that such landlords are keen to leave their amateur status behind and invest further. Rightmove’s research says that accidental landlords make up around 30% of all private landlords.
Just 16% of accidental landlords, says the site, say they want to sell the property just as soon as they can.
Shipside said: “Though not landlords by design, many of those accidentally thrust into the landlord arena have not only survived but thrived in many instances. From being one of the major casualties of the post-credit crunch market, some accidental landlords are now major beneficiaries.”
He added: “While the cavalry charge from major institutions seeking to invest in the private rented sector has so far failed to materialise, private landlords, whether accidental, virgin or professional, are perhaps enjoying the respite and seizing the opportunities that come with having the battlefield to themselves.”
The Rightmove survey, conducted in the first two weeks of January, drew 10,008 responses.
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Comments
'Rag Tag' what makes institutional investors better? the institutional investors buying student blocks, what a joke, lets give it a few years, over supply soon in most cities....
So-called institutional investors seem only to be interested in high-return/guaranteed departure scenarios such as renting blocks of relatively high-spec rooms to overseas students. They are justifiably afraid of the potential for high maintenance costs and arrears with conventional tenancies and HMOs: businesses have to pay maintenance workers whereas many private landlords do a lot of unpaid work themselves to keep their costs down, and incidentally make themselves more competitive with the economies of scale and finance that the large firms enjoy.
I wish Rightmove wouldn't use sneery pejorative terms like "rag-tag army" for private landlords. Arguably private landlords should be celebrated as an example of domestic capitalism at work - Mrs Thatcher's notion of mass share ownership may have subsided with the very poor returns delivered by the stock market since the year 2000, but rental property is one of the few areas where the average little guy, supported by letting agents, has a fighting chance of running his own business and make some money in addition to working as an employee.
In my area (Reading), the BTL market is very healthy in the cheaper 2-3 bed house market, but FTBs and buyers of larger houses are still in hibernation.