The record high average market value of landlords’ investment property of £1.70 million – recorded during the third quarter of 2018 – could represent a peak, with landlords preparing for uncertainty.
According to the latest private rented sector trends survey report from lender Paragon, overall optimism is subdued, with landlords expecting property values to stagnate.
The survey shows that immediately prior to the global financial crisis, the average portfolio value was £1.6 million, and that average is 6% higher today. During the banking crisis, portfolio values fell sharply, dropping back to £1.35 million in the first quarter of 2009.
It is suggested that around the time of the financial crisis, the average landlord had a portfolio comprising of 12 properties, and most managed to maintain this throughout the crisis, with many beginning to add to them once the global economy recovered around 2010.
However, the average portfolio peaked at 14.8 properties in the third quarter of 2014, but this has shrunk to a current average of 12.6. Despite portfolio values being at record highs, landlord optimism about the future remains subdued.
Just 11% say express optimism about the prospects for their property portfolio over the next 12 months, and 21% plan to sell some of their buy to let properties, while only 9% expect to add to their portfolio.
Paragon says that, even assuming landlord portfolios remain unchanged in size, most expect to see a slight drop in the value of their portfolio in the next 12 months – outnumbering 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.