According to the latest Private Rented Sector (PRS) Trends research gathered by Paragon Bank, landlords with between 6 and 20 properties in their portfolio have increased from 35% to 39%. This is based on interviews that were held with experienced landlords in the first quarter of 2018.
With the end of 2017 showing a drop in the proportion of landlords in the 3 to 5 property bracket, this information implies a healthy level of growth. Down from 26% to 24%, this could indicate the potential for an increase in polarisation between small-scale landlords and those displaying a fuller portfolio.
Looking higher up the scale of portfolios, there has been a fall in landlords with over 50 properties. The latest survey has recorded a drop from 6% to 4%, with an overall reduction in the average portfolio size from 13.1 to 11.6 properties.
Choosing to resize or reduce a portfolio are a couple of examples of tactics used by landlords in order to adapt to regulatory and fiscal changes in the buy-to-let sector.
Across the average property portfolio, the loan to value ratio has dropped from 35% to 32%, compared with three months ago. In 2012 it had peaked at 43%, but has since hit its lowest level since the start of Paragon’s PRS Trends survey in 2001.
Other changes have also occurred, as we have seen almost a quarter (24%) of landlords increase rent prices in the last three months. Landlords have also reported that they were spending an increased proportion of their rental income on mortgage costs, seeing the overall figure rise from 26% to 30% of income at the end of 2017.
John Heron, Managing Director of Mortgages at Paragon said: “Our latest survey demonstrates how tax and regulatory changes are beginning to drive changes in landlord behaviour, with evidence of polarisation between small landlords and those with more substantial portfolios beginning to emerge.
“Our own experience highlights that landlords with larger portfolios need access to products that cater for landlords with more complex requirements and broader underwriting expertise, increasing the role for specialist lenders in the buy-to-let market.”