Confidence in the health of the buy-to-let market will encourage significant investment in the sector by UK property investors in 2015, according to new research from Platinum Property Partners, the specialist buy-to-let business.
This comes despite the fact that 52% of buy-to-let investors believe interest rates will rise next year. The research – which surveyed over 500 UK buy-to-let investors – revealed that while the majority expect an increase, overall 42% believe interest rates will rise by less than 2%. Only 10% expect to see interest rates rise by 2% or more. However, 29% cited a rise in interest rates as their biggest concern for 2015.
While an interest rate rise of any size would make buy-to-let borrowing more expensive, this hasn’t slowed down landlords’ ambitions, the report said. 43% of existing landlords intend to grow their portfolio of rental properties next year. Most intend to expand their portfolio by one property (23%), although 14% will purchase two more rental properties in the next 12 months.
Landlords owning Houses in Multiple Occupation (HMOs) for young professionals and key workers have some of the biggest ambitions for 2015. 52% of them plan to add to their buy-to-let portfolio during 2015, with 29% planning to add two properties while 14% will add three.
Landlords still feel confident about capital growth despite recent reports that the housing market is slowing. While the Council of Mortgage Lenders (CML) point to a dip in mortgage lending as evidence that there has been a ‘plateau’ in housing market activity, landlords are confident that house price growth will continue during the course of the next five years. 49% expect UK property values to climb by up to 10% over this period, while a further 28% of investors predict an increase of 10% or more.
HMO landlords have an even more positive outlook for capital growth. 43% believe property prices will increase by 10% or more: 15% more than the overall average. None of the HMO landlords surveyed expect house prices to decrease in the next five years.
However, UK buy-to-let investors have some concerns about what 2015 may bring. When asked for their number one concern, an increase in interest rates topped the poll (29%), closely followed by future changes in laws and legislations for landlords (26%). A further 9% are most concerned about the impact of a change of Government ahead of the general election. Only 20% of investors have absolutely no current concerns.
Steve Bolton, founder and chairman of Platinum Property Partners (PPP), said: “A rise in interest rates is one of landlords’ main concerns for 2015, yet the majority don’t anticipate that these rises will be dramatic or unaffordable. As a result, our research reveals that the sector will continue to grow next year, with two in five planning to add to their buy-to-let portfolio despite a likely interest rate rise.
“Investors in HMOs show the greatest intention to increase their portfolios, which reflects the fact that HMOs and renting to working tenants such as young professionals delivers extremely attractive returns, and offers higher rental income compared to other buy-to-let options if done properly. This has cultivated robust confidence among those already reaping the fruits of this type of investment, and has sown the seeds for ambitious expansion in the sector next year.
“This is great news for the long-term health and prosperity of the sector, as thousands of ambitious young professionals at the beating heart of economy depend on the flexibility of rental accommodation to follow the best job opportunities. However, they also require more choice of high-quality yet affordable homes to help them save for a deposit should they wish to buy in the future.
“Naturally, as an investor you can never guarantee the level of your return, and even seasoned landlords need to do their homework and seek expert advice before making another investment to maximise their profit potential.”