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Paragon: Large scale landlords make targeted investments

Larger scale landlords are continuing to make targeted investments to optimise their position, according to Paragon’s PRS Trends Report for Q2 2019.

Its latest quarterly survey – which tracks the experience of more than 200 seasoned landlords – shows that landlords now have an average of 13.1 properties in their portfolios, up from 12.8 properties three months ago.

What’s more, landlords with between 11 and 20 properties have grown as a proportion of the survey population from 14% to 18%. This has resulted in the value of average portfolios getting higher – rising from £1.68 million in Q1 2019 to a record high of £1.76 million this time round.

The survey also highlighted that larger scale landlords are nearly three times as likely (11%) to be considering a property purchase in the next quarter than their smaller scale counterparts (4%).

Interestingly, there has been a sharp increase in those considering buying houses in multiple occupation (HMO) property – up from just one in 20 (5%) to one in five (20%).

Paragon says this is not only indicative of higher experience levels amongst prospective buyers, but it also suggests that landlords are looking to add higher-yielding properties into their portfolios, perhaps to offset some of the pressure from rising tax costs.

Additionally, despite the higher activity levels among larger scale landlords, overall landlord sentiment remains ‘subdued’, with only 13% feeling optimistic about the future.

Therefore, landlords continue to take steps to strengthen their financial position with debt still barely over one third of average portfolio value and mortgage payments as a proportion of rent down from 27% to 25%.

“Professional landlords with larger portfolios make up the backbone of the UK’s private rented sector and it’s encouraging to see them continue to build their property portfolios,” John Heron, director of Mortgages at Paragon, commented.

“However, with a heightened interest in higher yielding property types and an increasingly prudent approach to financial management, it’s clear that landlords are proceeding cautiously as they seek to head off the twin challenge of higher tax and growing economic uncertainty.”

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