The average market value of landlords’ investment property reached a record high of £1.70 million during the third quarter of 2018 which could prove to be a peak as landlords prepare for uncertainty.
Landlords are expecting values to soften and overall optimism is subdued, according to the latest private rented sector trends survey report from lender Paragon.
The survey shows that average portfolio values are now 6% higher than the £1.6 million recorded 10 years ago immediately prior to the global financial crisis. During the banking crisis, portfolio values fell sharply, dropping back to £1.35 million in the first quarter of 2009.
The Paragon report says that at the time of the crisis, landlords had an average of 12 properties in their portfolio and maintained their portfolios at around this size throughout the crisis period, before beginning to add to them once again from 2010 onwards.
However, after peaking at 14.8 properties in the third quarter of 2014, the average portfolio size now stands at 12.6 properties.
Despite record portfolio values, landlord optimism about the future remains subdued.
Just 11% say they feel optimistic about the prospects for their property portfolio over the next 12 months and 21% expect to sell some of their buy to let properties while only 9% expect to buy.
Paragon says that, even assuming their portfolios remain unchanged in size, more landlords expect to see a slight drop in their portfolio value over the next 12 months than those who anticipate an increase.
‘Landlords operating in the buy to let sector have been subject to unprecedented tax and regulatory changes and they are understandably cautious about the future. Many have already taken action to mitigate against the impact of these changes, including the sale of some of their properties and a reduction in gearing,’ said John Heron, Director of Mortgages at Paragon.
‘While the increase in portfolio values will provide some cheer, landlords continue to face significant headwinds as they prepare for the first-phase impact of the mortgage interest tax relief removal and potential economic uncertainty surrounding Brexit,’ he added.
