Rental Market Becoming Attractive Retirement Plan

In an online survey of 469 National Landlords Association (NLA) members, BM Solutions/BDRC Continental found that more and more people are moving into the rental market as landlords in preparation for retirement. 80% of single property and portfolio landlords surveyed said that they view their property as supplementary income to their pension, with nearly two-thirds (61%) of these landlords intending to live off the rental income.

Another 39% said that they intend to make a decision dependent on the state the property market is in when they reach retirement. Not many portfolio landlords were shown to have much interest in selling their properties, with only one in five considering selling any of their properties, and just one in twenty planning to sell all of their properties.

Many of the landlords surveyed consider their properties to be a safer bet than investments such as pensions. 10% of landlords were found to have used previously invested funds to purchase property outright. 31% of these said it was because they believe investing in property will give them a better return on their money. Other reasons given included 19% saying it was just to provide an income, 15% said it was a long-term investment, another 15% said it was to off-set poor pension performance, and 8% described property as an alternative investment. 6% said they believed that property is less risky than traditional forms of investment such as stocks and shares.

Mark Long, Director at BDRC Continental said, “Landlords consistently tell us that they see their property portfolio as forming a critical part of their pension provision for the future. On average, landlords intend to remain active in the rental sector for another 15 years or so, and see a combination of capital gains and rental income as underpinning their pension strategy.”

According to the BDRC Continental Landlords Panel, which monitors the performance and sentiment of the private rental sector in Britain every three months, optimism fell by six points compared with the second quarter of 2012, meaning that in Q3 key confidence indicators are almost exactly the same as in Q3 2011. However, tenant demand is strong, rising by 7% in Q3, and yields are up between 0.5% to 6.7%. Voids and arrears this quarter have remained stable.

Mark Long added, “Despite the
challenging economy, the private rental sector remains resilient for most of Britain’s private landlords. In Q3 this year we saw further evidence of that as the number of private landlords with a single property making a loss fell by three quarters from 16% in Q2 this year to 4% in Q3, and although short-term confidence has taken a bit of a seasonal knock, I fully expect optimism to recover as we end 2012 and enter 2013.”

The proportion of landlords buying up more property for their portfolio in Q3 increased by 3% to 15%. Although, landlords now appear to be getting pickier about what properties they add, with the average number of properties being added decreasing from an average of 2.6 to 1.8, back to the level seen in Q1 2012. Over the next 12 months, just over a fifth of landlords intend to add more properties to their portfolio.

Commenting on the findings of the research, Phil Rickards, head of sales at BM Solutions said, “It is clearly evident that Britain’s love affair with bricks and mortar remains strong with many landlords looking at property investment as a supplement to their pension in retirement.

Whilst landlords remain confident in the long term viability of the rental market; with the economic uncertainty in the UK and Europe, landlords are being more cautious and selective in expanding their portfolios.”

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