Landlords thirsty for London property but finance still an issue

Positive sentiment is heavily skewed towards London, appetite to invest is strong, but access to appropriate finance is preventing them from purchasing additional property.

London Leads Market Outlook

The proportion of landlords who expect property prices in London to remain static or rise over the next 12 months remains relatively stable for the third quarter at 78%. However for UK property outside London, sentiment dipped; only 49% expect prices to be at or above their current level in 12 months time, down from 60% who, at the end of 2009, predicted the same to be true.This shows a growing disparity of sentiment between residential property prices in London and the rest of the UK.

Anticipated changes in property prices are improving irrespective of location, but the pace of change remains extremely cautious and, once again, London leads the way.

Landlords expect to see an average price increase in London of just 1.48% by this time next year (although that is twice the rate of increase that was being predicted last quarter). For property outside the capital, although price expectation is lifting, it remains negative. Landlords expect UK property values outside London to fall by 0.58% over the coming 12 months; an improvement over the drop of 1.0% that they had predicted at the end of 2009.

Purchase Constraints

The ongoing difficulties of securing funding for buy-to-let property purchases remains of concern to UK residential landlords; perhaps accounting for the fact that although investors are increasingly positive about prices (particularly in London) and unquestionably see property as a long term investment, they are not expecting to buy additional investments over the next 12 months in as great a number as in previous quarters.

Irrespective of the outcome of the General Election, landlords appear resigned to the fact that access to mortgage finance is unlikely to be unlocked quickly. At the beginning of 2008, 65% of investors were investigating mortgage options as regularly as every 3 months. That figure has now plummeted to just 5%, with 43% now investigating mortgage options less frequently than annually.

Looking to the Long Term

A full 100% of landlords questioned intend to hold their residential property investments for the next 12 months. Furthermore, 47% expect to hold their assets for at least 10 years (up from 35% a year ago) and 24% of private property investors intend to retain their properties for the next 20 years or more, up from 22% last quarter and 21% a year ago.

The average period that landlords expect to hold their rental property assets is 12 years, the same length of time as recorded by Young Index last quarter, but a year longer than at Q1 2009.