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Landlords Have Unrealistic Expectations of Returns
This article is an external press release originally published on the Landlord News website, which has now been migrated to the Just Landlords blog.
Data taken from YouGov’s Landlords and Mortgages 2013 report suggests that landlords are expecting unrealistic returns from their buy-to-let property.
Lenders have suggested that landlords newly entering the buy-to-let market are more focused on potential long-term returns of a property than before the financial crisis. Critics argue however that YouGov’s findings suggest many landlords are not taking into account a range of necessary payments when calculating their figures.
Decline?
The report indicates that landlords’ total returns are in decline, despite rising rental prices. Between 2002-2006, landlords’ returns were between 4%-6%. However, the findings suggest that they are now between just 1%-4%.[1]
A possible reason for this reported decline is landlords overlooking many mandatory costs. The data shows that 93% consider mortgage interest payments, but only 68% take account of agency fees, and 46% budget for other management expenses.[1]
Buy-to-let in general has continued its remarkable growth, with 1.5m landlords making up 13% of total lending.[1]
Landlords Have Unrealistic Expectations of Returns
Landlords
The Strategic Society Centre recently released a report entitled Understanding Landlords, collated in order to ascertain the profile of the everyday landlord. The think tank found that “private rented sector landlords have, on average, a more advantaged background,” with 40% of 45-64 year old landlords having a degree or higher qualification.[1]
There are concerns that the well educated private sector are driving up prices, making it increasingly difficult for young people to purchase property.
Limits
The findings of the YouGov report have called for limits on landlord activity. Campaigners are asking for prohibition surrounding the purchase of new build properties with buy-to-let loans. Pricedout.org.uk, a website campaigning on behalf of young would-be homeowners, has called for a landlord’s right to offset mortgage interest against tax to be stopped.
However, Richard Lambert from the National Landlords Association (NLA), has slammed the Strategic Society Centre’s report, coining it “Misunderstanding Landlords.” Lambert suggests: “The authors just want to prove their preconception that the growth of the sector is the cause of problems in the market rather than a consequence of them.”[1]
Lambert then asks: “Will anyone be surprised to learn that those who invest in property are wealthier than those who have not been able to buy?” before continuing, “claiming that the private rented sector represents a transfer of wealth from tenants to landlords is like saying that pubs represent a transfer of wealth from drinkers to publicans.”[1]
[1] http://www.landlordexpert.co.uk/2013/07/15/landlords-have-unrealistic-expectations-of-property-returns-claims-new-report/
