BTL investors plan to expand their portfolio despite anticipating an interest rise

According to the latest research from Platinum Property Partners, confidence in the health of the buy-to-let market will boost investment during 2015 despite the fact that 52% of investors believe interest rates will rise next year.

Related topics:  Landlords
Warren Lewis
16th December 2014
Landlords

500 UK BTL investors were surveyed and the data revealed that although 29% cited a rise in interest rates as their biggest concern for 2015, a large number believed interest rates will rise by less than 2%. The data also showed however that 10% expect to see interest rates rise by 2% or more.

The prospect of a rent rise hasn’t slowed down landlords’ ambitions. 43% of those surveyed said they intened to expand their portfolio next year. Most intend to expand their portfolio by one property (23%), although more than one in ten (14%) will purchase two more rental properties in the next twelve months.

HMO investors have some of the biggest ambitions for 2015 with just over half of them planning to add to their BTL portfolio during 2015.

Landlords still feel confident about capital growth despite recent reports that the housing market is slowing. While the Council of Mortgage Lenders (CML) point to a dip in mortgage lending as evidence that there has been a ‘plateau’ in housing market activity, landlords are confident that house price growth will continue during the course of the next five years. Just under half (49%) expect UK property values to climb by up to 10% over this period, while a further 28% of investors predict an increase of 10% or more.  

HMO landlords have an even more positive outlook for capital growth. Over two in five (43%) believe property prices will increase by 10% or more: 15% more than the overall average. None of the HMO landlords surveyed expect house prices to decrease in the next five years.

Concerns about 2015

However, UK BTL investors have some concerns about what 2015 may bring. When asked for their number one concern, an increase in interest rates topped the poll (29%), closely followed by future changes in laws and legislations for landlords (26%). A further 9% are most concerned about the impact of a change of Government ahead of the general election. Only one in five 20% of investors have absolutely no current concerns.

Steve Bolton, Founder and Chairman of Platinum Property Partners (PPP) comments: “A rise in interest rates is one of landlords’ main concerns for 2015, yet the majority don’t anticipate that these rises will be dramatic or unaffordable. As a result, our research reveals that the sector will continue to grow next year, with two in five planning to add to their BTL portfolio despite a likely interest rate rise.

Investors in HMOs show the greatest intention to increase their portfolios, which reflects the fact that HMOs and renting to working tenants such as young professionals delivers extremely attractive returns, and offers higher rental income compared to other BTL options if done properly. This has cultivated robust confidence among those already reaping the fruits of this type of investment, and has sown the seeds for ambitious expansion in the sector next year.

This is great news for the long-term health and prosperity of the sector, as thousands of ambitious young professionals at the beating heart of economy depend on the flexibility of rental accommodation to follow the best job opportunities. However, they also require more choice of high-quality yet affordable homes to help them save for a deposit should they wish to buy in the future.

Naturally, as an investor you can never guarantee the level of your return, and even seasoned landlords need to do their homework and seek expert advice before making another investment to maximise their profit potential.”

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