Landlords Turn to Rental Market to Supplement Income

The key factor in pushing landlords into the private rental sector is to enhance their monthly income, says the latest BM Solutions/BDRC Continental Landlord Panel.

The research found that a large amount of respondents (43%) said that they use their rental income to support their monthly expenditure, as income levels remain steady, and people have less disposable income. This figure is 3% higher than that of the second quarter (Q2) of 2013.¹

The second highest reason was to supplement their retirement fund, with one third of landlords reporting that their reason for joining the industry is to prepare their finances for retirement.1

Respondents emphasised the importance of a property investment to a landlord’s retirement fund, as 75% of landlords state that property is their pension, with property assets making up 62% of the average landlord’s retirement stock. More than a third believe that property provides a better return than shares as a long-term investment, with less risks and opportunities to add capital investment.1

Landlords Turn to Rental Market to Supplement Income

Head of Sales at BM Solutions, Phil Rickards, says: “The squeeze on spending does mean that we’re seeing more landlords using their rental income to supplement the cost of living.

“However, confidence in the UK property market is leading to more people entering the market, importantly seeing it as long term investment rather than focusing on the short term.”1

Confidence in the buy-to-let market is now at the highest rate in six years, and almost as certain as pre-recession levels, as 68% of respondents are confidence in the prospects for the future.1 Specifically, landlords are optimistic about capital gains, and the general economy.

35% of landlords stated that tenant demand is beginning to level out; the highest amount since Q2 2012’s 38%. The largest level of demand from tenants was seen in the East of England (49%) and London (46%).1

In the past quarter, the average rental yield dropped by 0.1%, to 6%. Comparatively, the average rental yield in Q4 2012 was 6.2%, and 6.1% in Q1 2012.1

More than half (57%) of respondents increase their rents when new tenants moved in, and 51% stated the reason for raising rents was to reflect local prices.1

36% of landlords said they had at least one void period in the last three months, a rise of 3% of the previous quarter. 65% of those were also unexpected. Average voids have dropped, however, by five days to 64 days.1

Void periods were at the highest rate in the North East, and lowest in the South East. Two thirds of respondents said the difficulty of finding good tenants to replace their previous ones was the most common reason for unexpected voids.¹

Research has found that the average tenants stays in the same property for two-and-a-half years, and one in ten stay longer than five years.¹

The survey also found that an average of 1.7 tenants per landlord is in arrears, but this is the lowest number in three years. The average amount owed is also lower, down by £358 to £1,532.¹

¹ http://www.landlordtoday.co.uk/news_features/4-in-10-Landlords-turn-to-the-rental-market-to-supplement-monthly-income