Over the last few years we have seen a number of in-depth surveys of the UK buy to let market. Bodies such as the Council of Mortgage Lenders (CML), UK Government and the Tenancy Deposit Scheme (TDS) have all collated some interesting data on the typical buy to let investor/landlord with some surprising trends emerging.
Average age of a landlord
In 2016 the majority of landlords were aged over 51 (55%) with 25% between 31 and 40 and 18% between 41 and 50. This is a trend which has remained relatively unchanged over the last decade or so. Many landlords aged over 51 have benefited from generous pension returns since the 1980s with many choosing the buy to let market as their income stream of the future.
Accidental landlords
Changes in society have led to an increase in the number of people becoming “accidental landlords” as a consequence of changes to their marital status and personal circumstances. For example, 61% of landlords aged between 31 and 40 became landlords by “accident” because of changes to their circumstances.
Number of properties owned
As demand for private rental accommodation continues to increase so we have seen a rise in the average number of properties owned by buy to let landlords. Between 2010 and 2016, according to the CML surveys, the number of landlords with just one property fell from 78% to 63%. Those managing between two and four properties subsequently increased from 17% up to 30%.
Part-time or full-time landlords
It is clear from a number of surveys that the vast majority of buy to let investors do not see it as their full-time job. Various surveys confirm this figure is in excess of 90% although this could change as workloads and average portfolio sizes continue to increase. Expectations that private landlords with relatively small portfolios would leave the market appear to be a little premature.
Rent as a source of landlord income
In this area we are starting to see some changes between 2010 and 2016. Those who counted zero rental revenue towards their total income fell from 21% to just 5%. Those with up to 25% of total income provided by rental revenue increased from 58% up to 65%. As a percentage of overall income, those receiving funds of between 25% and 49% from rent increased from 11% up to 21%. These figures suggest that the buy to let market is becoming more business-like with a focus on maximising rental income.
The future of buy to let
Even though recent tax increases by the UK government have impacted returns from the buy to let market, the expected sell-off has not emerged. There is still very strong demand for private rental properties, rental yields are still extremely attractive and long-term potential for capital growth is still a factor. As more private landlords continue to build up equity in their original properties we may see them gearing up their assets to expand their buy to let portfolios. Rental income is also likely to become a more prominent element of a landlord’s overall income going forward.