Why are Landlords Expanding their UK Property Portfolios?

Landlords are expanding their UK property portfolios to capitalise on rising rental yields and safeguard against market changes. 

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Confidence amongst residential landlords is increasing in 2022, with recent research through Paragon bank showing that the number of landlords who plan to expand their UK property portfolios outnumbers those who intend to reduce them—the first time this has been the case in over four years.

The survey of over 900 residential landlords showed that 19% were planning on investing in more property in the coming year.

In contrast less than a fifth of those surveyed said that they intended to sell at least one property, a decrease from the previous two quarters showing a return to pre-pandemic levels.

With a favourable market and rising rents, it’s easy to understand why professional investors are setting their sights on expansion this year.

uk property

An increased demand

Demand has continued to outstrip supply in the UK rental sectors, with asking prices for rent outside of London reaching record highs in 2022.

Data from Rightmove showed asking rents outside of London hitting an all-time high of £1088 per month in April, and annual rental growth hit 11% year on year—the first time ever that growth has gone over 10% on an annual basis.

In June, Rightmove reported that there are triple the number of prospective tenants as there are available properties to rent. With total tenant demand up 6% and available stock down by 50% year on year, it’s an incredibly favourable market for landlords.

Rightmove project that UK rental growth excluding London will rise by 4.5% for the rest of the year; and that London rents will rise by 3.5%.

A professional sector

Changes to the law over recent years have seen a lot of “accidental landlords” exit the market. We are now seeing an increasing number of professional landlords looking to build a long-term UK property portfolio which is designed to generate immediate income via good rental yields, with an eye to future capital growth.

With less rental properties on the market to let, these investors are able to generate high rental income and also be more selective when it comes to tenants.

While changes to lending, governance and fees have impacted revenue, for those who want to make a long-term investment, bricks and mortar will always be a “go-to” for many.

Why are landlords investing?

Data collected from 300 landlords shows that the “opportunity to buy at a discount” was one of the most commonly cited reasons among those who have recently purchased or intended to purchase a property for rental. Other motivating factors included long-term investment (35%), diversification by location (26%) or diversifying property type (23%).

The pandemic shifted tenant requirements, and it seems that many landlords have reacted to this by opting to branch out into new types of property or more diverse locations, therefore safeguarding their UK property portfolios against market changes.

Contact us today for more information on property investment opportunities in the UK.