Residential property has long been the investment of choice for many Britons, but with many landlords who developed their portfolios in the early days of the buy-to-let market nearly 30 years ago now in retirement or nearing retirement age, a new breed of landlord will be required to step up and provide the rental homes of the future.
Paragon Bank surveyed 500 landlords with between one and three properties who have expressed a desire to grow their portfolios to understand what this future cohort looks like and what is driving their property ambitions.
+ The average age of aspirational portfolio landlords is 37.8. The highest proportion of landlords were aged between 25 and 34 (35%), followed by 35 to 44 (31%)
+ Three quarters were already higher-rate taxpayers and 77% are in full-time employment
+ Over four in 10 live in London or the South East, with 12% located in the North West
+ 51% are already involved in a property-related sector or role
The report found that family and friends with an existing property business was a key driver for 43% of next-generation portfolio landlords to initially become a landlord, followed by a desire to develop long-term rental income.
+ 67% chose property over other assets because it’s a tangible asset
+ 60% are investing in property because of the long-term demand for rental homes
+ 53% view it as a long-term investment to supplement their pension
+ 38% financed their first rental property via a buy-to-let mortgage, but 36% purchased outright
The research also highlighted how there is a greater desire to invest in more complex propositions. Today, only 8% of these landlords invest in houses in multiple occupation but that rises to 17% when thinking about the future. Similarly, 14% of landlords invest in multi-unit blocks currently and, in future, that is expected to grow to 26%.
Elsewhere, we see a large jump in the proportion who are targeting terraced housing, the staple of the rental market, rising from 26% currently to 37% in future.
Richard Rowntree, Paragon Bank managing director of Mortgages, said: “The PRS needs a consistent flow of new landlords coming into the sector, those with aspirations to develop the portfolios of the future. Our analysis of industry data shows that over the past 10 years, the average age of landlords purchasing a buy-to-let property with a mortgage has fallen.
“It is clear there is a committed group of younger landlords who stand ready to take the mantle and provide the rental homes of the future. What they require is a regulatory and fiscal environment that encourages them to do so.”
Click here to download the report.
New data suggests rental prices and affordability are ‘softening’
Tighter regulation and higher taxation will rid the rental market of rogue landlords and other bad actors and only the major players that have survived past property crises will survive.
The market will be cornered by professional landlords, hedge funds and private equity whom will own the likes of Connells, Foxtons and Rightmove in the not too distant future.
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Landlords entering the PRS have no experience of the downsides. That was me 25 years ago. Like many, I was an accidental landlord, and then invested to supplement my pension. Then… tenants and government became involved!
Yes, the country [and lenders] does need a steady influx of new landlords, but the profile of the PRS will be different, with different investment options. I just don’t see traditional BTL as one of them for younger new entrants.
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