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UK private sector property landlords more confident, survey suggests

The latest survey by specialist lender, CHL Mortgages, shows that landlords were particularly positive about rental demand with 43% suggesting it is now better than six months ago and it is sufficient to cover mortgage repayments, maintenance and cost.

CHL believe this supports the view that rental yields for residential investment properties have accelerated since the credit crunch and subsequent recession three years ago.

In the short term some 33% of landlords said they were looking to buy more investment properties in the next 12 months, up from 28% last yea. However, a lack of finance was still cited as the biggest constraint to achieving this aim. The other major constraint on expansion was the high deposit requirements that now come with buy to let mortgage products.

It also found that one in five respondents said they would consider fixing their buy to let mortgage to protect them against future interest rises and four in five landlords make adequate provisions for maintenance of their investment properties from rent receipts.

The same figure indicated they do not make overpayments on their borrowings indicating that borrowers are more inclined to channel any surplus rental income towards maintenance.

CHL believe the growing positivity shown by its landlord borrowers is reflected in its own arrears experience. At the end of May this year, the number of accounts greater than three months in arrears had fallen to 855 from a 2010 year end figure of 933. This represents just 1.92% of CHL’s total of 44,477 live accounts on its loan book and the lender fully expects this downward trend to continue despite a still uncertain economic outlook.

‘Our 2011 Landlord Survey confirms that buy to let remains an attractive asset class for savvy investors. Landlords are clearly positive about the future of buy to let and they have good reason to feel this way with rental demand growing as a result of a number of underlying drivers,’ said Bob Young, managing director at CHL Mortgages.

‘Clearly, a lack of credit, tougher lending criteria and higher deposit requirements are suppressing residential property ownership for many, which is resulting in considerable pent-up rental demand a real positive for the private rental sector,’ he explained.

‘With uncertainty in the equity and bond markets we can therefore expect more investors to reconsider buy to let as an alternative asset class; even more so if property prices continue to fall over the next couple of years. We can also expect some accidental landlords or investors who unfortunately bought the brochure pre credit crunch to exit the market if an opportunity presents itself, and existing landlords who are committed to the sector and eyeing up further purchases may well be able to enhance their portfolios as this happens,’ he added.

Meanwhile, a separate report shows that the surge in interest in central London rental property is continuing. According to WA Ellis there is a marked increase in students looking to get settled before the start of the new academic year in September. Due to the shortage of supply of studio and one bedroom flats to let, rents in this area of the market have increased by as much as 10% since the beginning of the year.
Expats are fuelling the family house market with cases of three of four families bidding against each other. The short let market is also extremely active and this is set to continue over the summer months while people flock from all over the world to Henley, Ascot and Silverstone. With the Olympics this time next year, short let prices may well be six times more than they are today, it added.