PRS Investors are Cautiously Optimistic

Young Index

Each quarter Young Index polls investor sentiment among 500 Private Rented Sector investors who hold UK residential property assets.

At first glance, results from Young Group’s Q1 2011 survey present a picture of unbridled positivity, led firmly by the capital, but dig a little deeper and it’s clear that a hint of caution does still remain.

Landlords Supporting Conservatives in General Election

So the starting gun has been shot by the Queen and the election campaign has officially begun. I thought you might like to know what party landlords think will benefit the private rented sector the most.

Results from our quarterly Young Index survey of residential investor sentiment show, overwhelmingly, that landlords believe a Conservative government would bring the greatest benefits for private rented sector landlords.

Of the 500 landlords polled, all of whom own residential property in the UK, 84% of respondents believe that a Conservative government have the policies to bring the greatest benefit to residential landlords.

This contrasts with 13% of landlords who expect a Labour government to create the right conditions for the private rented sector to flourish.

Of the three main political parties, the Liberal Democrats appear to be languishing far behind in third place in the eyes of property investors.  Only 3% believe that the Liberal Democrats would be good news for landlords.

 Do you agree?

I have copied below a summary of the rest of the results for your information.

Young Index: Headline Results for Q1 2010

• 100% of landlords intend to hold their residential property investments for the next 12 months.
• 47% intend to hold their assets for at least 10 years.
• 24% of landlords intend to retain their property investments for the next 20 years or more.
• The average period that residential property investors expect to hold their property investment assets is 12 years.
• 49% of investors are considering purchasing additional residential property assets within London over the next 12 months.
• 22% of investors are looking at opportunities in the UK outside of the capital.
• 78% of respondents believe that London prices will be at current levels or higher by this time next year.
• For UK property outside of the capital, 49% expect prices to be at current levels or higher by this time next year.
• Landlords expect to see an average price increase of 1.48% by this time next year, twice the increase they were expecting last quarter (0.7%).
• The predicted 12 month outlook for UK property prices outside the capital is a fall of 0.58%, compared to the drop of 1.0% predicted last quarter.
• 94% of respondents expect the Bank of England base rate to be higher than the current all time low of 0.5% by the beginning of 2011.
• The average base rate expectation for Q1 2011 stands at 1.25%, up from the 1.1% predicted for Q4 2010 in last quarter’s Index.
• 93% of landlords believe that Estate Agencies should be regulated.
• 86% of landlords believe that individual estate agents should be subject to regulation.
• 68% of landlords believe that they themselves should be regulated.
• 84% of respondents believe that a Conservative government would bring the greatest benefit to residential landlords.
• 13% of landlords expect a Labour government to create the right conditions for the private rented sector to flourish.
• 3% believe that the Liberal Democrats would be good news for landlords.

 To view the entire Young Index Q1 2010 results, including price outlook, interest rate expectation and landlords’ views on regulation, visit: http://www.younggroup.co.uk/downloads/PrivateRentedSectorMarketUpdate.pdf

Property Prices for 2010

There are many property price predictions doing the rounds currently.

I thought I would share what investors are forecasting for the coming year. Our latest Young Index show that investors forecast 2010 to be a year of consolidation and stability in the residential property market.

Far from the large property price changes foretold at either extreme of the wide ranging predictions made by agents, lenders and economists, the man in the street expects UK house prices to fall by a modest 1.0% during the course of 2010.  London, on the other hand, is predicted to perform slightly stronger than the national average by charting a growth of 0.7%.

Price Forecasts 2010

We directly poll the opinions of property owners – people who own their own homes and also investment properties – and it’s clear that they remain cautiously optimistic, expecting prices to remain relatively unchanged during 2010.  Interestingly, Young Index reveals that London is expected to out-perform the rest of the UK and is set to lead the market recovery.

The consolidation indicated by average price expectations is also reflected by the fact that 59% of those questioned are considering purchasing additional residential property assets to rent out within London over the next 12 months, compared to 43% who are looking at opportunities in the UK outside of the capital.  This compares to 33% and 8%, respectively, in Q4 2008 and is a continuation of last quarter’s upward trend.

However, again the lack of buy-to-let mortgages is of increasing concern to UK residential landlords, more so than any other aspect of the rental sector. When asked what improvement they would most like to see in 2010, 39% indicated that they long for more buy-to-let finance options. This is a significant increase on the fourth quarter of 2008, when 28% picked the lack of buy-to-let mortgages loans as their major concern.

So let’s see what happens . . .

Buy-to-Let Lives On

There was an article on the Sunday Times yesterday saying how Buy-to-let lives on. To me this seems a bit of a non story.

Over the last few years commentators have been speculating that buy-to-let does not have a future. Do these people not take note what is happening in the real world.

A few months ago we at Young Group wrote a paper which looked at the demographics of the UK going forward. One of the most obvious findings was the increase in ‘solo’ households – in 2006 it was 6.8 million, forecast for 2031 by the Communities and Local Government is for it to rise to 10.9 million, a 60%+ increase. This is driven by a selection of factors, including increased immigration, people marrying later, higher divorce rate, and importantly individuals wanting greater flexibility.

These points coupled with a growing population/households (in the same 25 year period, UK households are set to increase from 21.5 million to 27.8 million), lead to a need for more housing. However, many of these groups are unable to afford to buy – especially with the current difficulties in raising funds – therefore they look to the rental market.

The term buy-to-let came about in the late ’90′s when the Council of Mortgage Lenders (CML) worked with some lenders to offer more widely investment mortgages. However, there were many investors who had been doing this for years, it was not a new phenomenon but one that in many ways was just a case of rebranding.

For all the years I have been going to property events (MIPIM, Property Week’s Resi, etc) there has been a lot of talk about institutions such as Aviva, Legal & General, etc investing in residential property as was the case early in the last century. Apart from a few funds this has not materialised. It does make sense for them to invest in this asset class – and many are currently evaluating this as an option – but no action has taken place.

This has to be the biggest asset class where the individual investor has greater exposure than institutions. Despite the headlines of the last few years most who have invested in residential property are committed to it. Our recent Young Index survey shows that 98% of investors surveyed intend to hold for the next 12 months, with almost half planning on holding for at least the next 10 years. There are good returns to make out of this sector, seeing it as a long term investment is important.

So, let’s stop trying to kill off one of our oldest and most fundamental industries, and encourage it, as it is paramount for the future growth of the economy.