Paragon Bank has reported that acquisitive landlords have helped drive an improvement in standards in privately rented property, with four in five upgrading each rental home they purchase.
The buy-to-let mortgage specialist found that 81% of landlords make improvements on every property they add to their portfolio.
Its survey of over 500 landlords found 22% of landlords spend over £25,000 on upgrading a new portfolio property, with 18% spending between £10,000 and £20,000.
On average, landlords expect to see a 19.8% increase in the property’s value after completing upgrade work, with a 16.5% increase in expected rental income.
The research found that 40% of landlords prefer to purchase property in need of refurbishment, with 21% opting for properties that are ready for tenants to move into.
The private rented sector has experienced a significant improvement in the standard of homes over the past 15 years, correlating with the growth of buy-to-let finance, which Paragon’s new report, Raising the standards of privately rented property, examines.
In 2008, 44% of homes in the sector were defined as non-decent according to the government’s English Housing Survey. Today, that figure stands at 23%.
The addition of good quality homes has diluted the presence of poorer stock; In 2008, 1.8 million privately rented homes were classed as decent, rising to 3.3 million in 2021 – an 83% increase. There has also been a reduction in the number of properties classed as non-decent – falling from 1.4 million to 990,000, a 29% reduction.
Richard Rowntree, Paragon Bank’s managing director of mortgages, said: “Landlords have helped improve standards across the private rented sector over the past 15 years and the upgrading of stock they purchase is central to that.
“The vast majority of landlords will look to upgrade each new property to boost the capital value and the potential rental income. However, they also do this out of a genuine desire to provide a good quality home to their tenants.”
Asked why landlords make improvements to property, 83% of landlords said they did so to ensure they are providing a good quality home to tenants, with 82% doing so to make the property more attractive to tenants. Two thirds (66%) upgrade property to improve rental income and 57% look to increase the capital value. Meanwhile, nearly half (47%) upgrade property for energy efficiency reasons.
Painting and decorating is the most common improvement that landlords typically make (95%) followed by installation of a new bathroom or kitchen (78%) and boiler (also 78%). Six in 10 (60%) also add new windows, whilst a third of landlords (36%) also make improvements to gardens.
