Investors ditch shares for property

Monday 9th December 2013

A growing number of investors are turning to the private rental market for higher rental returns and potentially good prospects for capital growth, according to fresh research. 
The latest findings from BDRC Continental’s Landlords Panel show an increase in investors moving out of the stock market and into the private rental market by acquiring property. One third (33%) of those who had purchased property in the private rental sector using previously invested funds did so because they view it as delivering a better return than the FTSE. The equivalent figure in Q3 2011 was nine percentage points lower at 24%.
The research also shows that landlords are increasingly optimistic about capital gains on property, up 26 percentage points from 18% in Q3 2012 to 44% in Q3 2013. Comparing quarter to quarter, expectations for own letting business and the private rental sector in general are also becoming increasingly upbeat.
Britain’s private landlords in positive and acquisitive mood
With optimism for their letting businesses high and confidence in capital gains, private landlords are in acquisitive mood. 15% added to their property portfolio between July and September this year. Looking to the future, almost one quarter (23%) plan to add to their property portfolio in the next 12 months.
Buy to let sales volumes at the highest level for four and a half years
BDRC Continental’s analysis of quarterly data from Q1 2009 shows how closely the sales volumes of BTL mortgages mirror landlords’ confidence in their own letting business performance (see chart below). 
One in three landlords own their private rental property outright
But not everyone needs a mortgage.  A significant proportion of private landlords (32%) own their property outright. When asked why they had no mortgage, the highest number of these ‘unencumbered’ landlords – 29% – said they had used previously invested funds to buy privately rented property.  
Some of these ex-investors become ‘professional’ landlords, classified as those with 20 or more rental properties in their portfolio. They are doing particularly well at the moment.  In the professional landlord category, more than one quarter own their properties outright, and 81% say they make a “profitable full-time living” from letting.
Mark Long, Director at BDRC Continental, says: “Ex-investors currently see property as offering a better return than the stock market – both in the immediate and long term – and we’re seeing them use their funds to buy property outright and move into the rental market. With very strong demand for rental properties at the moment, they look set to enjoy the good returns they expect from renting for some time.”

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