Large Scale Buy to Let Giants with Multiple Investments on Rise

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Large scale landlords are on the rise, according to Paragon’s latest private rental sector (PRS) trends report.

Landlords who have between 6 and 20 properties in their portfolio have increased in number from 35 per cent to 39 per cent, according to Paragon. This is based on interviews with 203 experienced landlords in the first quarter of 2018. This follows a decline in the proportion of landlords in the 3 to 5 property bracket at the end of last year. The aforementioned group is down from 26 per cent to 24 per cent. This trend indicates a growing polarisation between large scale landlords and their smaller counterparts.

A fall in landlords with over 50 properties was also recorded, declining from 6 per cent to 4 per cent. An overall reduction in the average portfolio size was also noted, dropping from 13.1 to 11.6 properties.

Landlords appear to be resizing their portfolios in order to adapt to regulatory changes in the buy to let sector. This is being done alongside reductions in portfolio gearing and rent increases.

Portfolio gearing, which measures the loan to value ratio of a property portfolio, reduced from 35 per cent to 32 per cent in comparison to the previous quarter. This marks a decline from a peak of 43 per cent in 2012, hitting its lowest level since the Paragon PRS Trends Survey began in 2001.

A further mitigation technique is to increase rent. 24 per cent of landlords reported that they had increased rent in the last three months. They were also spending an increasingly large proportion of their rental income on mortgage costs, reaching 30 per cent of their income from 26 per cent.

Managing Director of Mortgages at Paragon, John Heron, 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.’

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