A survey by a leading landlords association revealed that most property investors plan for retirement rather than the present day when they look to expand their portfolio.
The National Landlords Association (NLA) questioned over 500 of their members in the last quarter of 2011 to get the statistics and they do reflect figures from at least one Government department. Over 80% of the respondents said they now saw their property portfolios as their main income in retirement as they had lost all faith in conventional saving because of the dire financial situation in the UK.
This backs up figures from the Department of Work and Pensions who in the same period reported a drop in people taking out private pensions of 8%. There is no doubt that interest rates are no help at all for people looking for a safe, but rewarding place for their cash at the moment whereas the private rental market is booming. Property investors in many parts of the UK have never had it so good.
David Salusbury, chairman of the NLA, viewed the situation thus: “Landlord confidence in the financial market is at an all-time low. This combined with record low interest rates means that many individuals are looking for alternative ways to secure their financial future. Private-residential property can be a sound long-term investment for those planning their retirement. But potential landlords must realise that letting property is a lot more complicated than contributing to a pension.”
He went on: “Becoming a landlord is just like starting any other small business. Anyone considering using property to bolster their pension plans must make sure that they put together a long-term business plan, taking account of the various regulations governing the letting of property including adequate property insurance, as well as their responsibility to tenants.”
Quarter 2 of 2010 saw a small drop in the number of private sector landlords in the United Kingdom who think that now is a good time to invest. Three months ago 48% of Landlords had this way of thinking, now that number has dropped to 42%; this is according to research carried out by LSL Property Services.
They also reveal that mortgage finance remains tight and with the CGT (Capital Gains Tax) increase it is thought that it may cost the average landlord an extra £11000. Despite this news almost a third of landlords think that they are likely to expand their portfolio in the next year. The number of landlords who are considering leaving the private rented sector has gone up by 6% in the last 13 weeks and is now at 19%. Whatever the results of any research, one thing remains crucial, that landlord insurance is always considered to cover the property.
David Newnes, estate agency managing director of LSL, said “Rising rents and house prices offered landlords bumper annual returns at the start of the year and this was reflected in the surge in confidence. This has fallen slightly following the slowdown in house prices and the capital gains tax hike. But the vast majority of landlords remain committed to buy to let. Attractive rents, just £12 per month shy of their peak, and increasing yields underpin their confidence in property investment. Mortgage finance remains a daunting obstacle for those looking to get a foot on the property ladder. This is keeping thousands of frustrated buyers in rented accommodation, pushing up tenant demand and rents.”
The research also showed that 63% of landlords in the private sector think that this increase in demand will carry on for the next two years, this compares to the five in a hundred landlords who think the demand will fall away. The increased CGT by the government has hit the confidence of many landlords and it will hit many more in the pocket during the next couple of years. But in truth the hike was not as big as many feared and it is already noticeable that landlords have adapted their strategies for their portfolios.