BTL market to remain strong in 2015, despite possible interest rate rise
22 December 2014
Confidence in the health of the buy-to-let (BTL) market will inspire substantial investment in the sector by UK property investors in 2015, according to research from Platinum Property Partners, the specialist buy-to-let business.
This positive outlook comes despite the possible rise of interest rates, with more than half (52%) of BTL investors believing that they will rise next year. The survey, which spoke to over 500 UK BTL investors, found that while the majority expect a rise, 42% believe interest rates will go up by less than 2%. Just one in ten (10%) believe interest rates will increase by 2% or more. Despite this, 29% said their biggest concern for 2015 was a rise in interest rates.
Although an interest rate increase of any amount would make BTL borrowing more costly, landlords’ ambitions haven’t been curtailed. Of the existing landlords surveyed, two in five (43%) plan to expand their portfolio of rental properties in 2015, with the majority intending to grow their portfolio by one property (23%). Over one in ten (14%) intend to buy two more rental properties in the next year.
More than anyone else, landlords owning Houses in Multiple Occupation (HMOs) for young professionals and key workers have some of the loftiest ambitions for next year. Over half (52%) intend to flesh out their BTL portfolio during 2015, with close to a third (29%) planning to add two properties while 14% will add three.
Despite recent reports that the housing market is slowing, landlords still feel assured about capital growth. The Council of Mortgage Lenders (CML) have pointed to a dip in mortgage lending as evidence that there has been a ‘plateau’ in housing market activity, but landlords remain confident that house price growth will continue during the course of the next five years. 48% expect UK property prices to soar by up to 10% over this period, while a further 28% of investors forecast an increase of 10% or more.
As well as a rise in interest rates, BTL investors also have some other concerns for 2015. Future changes in laws and legislations for landlords (26%) were their second biggest concern, whilst 9% are most concerned about the impact of a change of Government ahead of the general election.
“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,” Steve Bolton, Founder and Chairman of Platinum Property Partners (PPP), said. “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.”
He added: “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.”