Landlords still favour urban areas

Over the past year, there has been much discussion that tenants and landlords would be shifting their focus from the UK’s cities to the countryside, as a result of Covid-19 and opportunities to work from home. However, a new report commissioned by Paragon Bank casts this into doubt.;
Cities

Over the past year, there has been much discussion that tenants and landlords would be shifting their focus from the UK’s cities to the countryside, as a result of Covid-19 and opportunities to work from home. However, a new report commissioned by Paragon Bank casts this into doubt.

Nearly 70% of the 846 landlords surveyed said that they were planning to continue to target property in urban areas for their next portfolio purchase.

The research found that 16% of landlords planned to buy an average of 2.2 properties over the next 12 months. Of those looking to purchase, 68% said they were considering purchasing property in urban areas, with over a third planning to purchase in the suburbs and just 6% considering rural properties.

Paragon’s managing director for mortgages, Richard Rowntree said:

“While we have seen some move out of urban areas, this isn’t possible or desirable for everyone. The successful landlords will be the ones who invest with the intention of meeting the diverse demand for good quality, affordable housing.”

Covid-19 impact on rentals ‘short term’

Mr Rowntree’s sentiments that landlords were treating Covid-19’s effects on the housing market as a short term blip continued, as he stated:

“These figures show that landlords continue to display a considered, careful approach to property investment, looking at long-term trends rather than short-term sentiment.”

The survey’s results echoed the long term vision spoken about by Mr Rowntree, with two-thirds of landlords reporting that they planned to buy in the same area as their existing property, compared to just 10% who stated they were targeting new areas.

Mr Rowntree continued by saying:

“While we need to be able to adapt to changing market conditions, something that the industry has done well, it is also important to look at the bigger picture. In doing this, we see that despite significant shocks to the system, the fundamental principles underpinning the private rented sector remain.”

With the demand for urban housing being strongest, there’s little surprise that the most in-demand property type amongst those landlords surveyed were terraced houses, with over 50% of landlords stating that terraces are the type of property they are looking to target.

The second most popular property type was semi-detached houses, with 37% stating that they were interested in purchasing one. Flats came third, with just over a quarter of landlords showing an interest in purchasing.

The survey also asked landlords to identify the key attributes that they look for in a new investment property.

Important factors when buying rental property

The most important attribute according to those surveyed was a property's potential rental yield, with 77% of landlords stating the rental yield was the most important attribute when assessing whether to purchase a property.

This was followed by the potential for adding value, which 59% stated was important to them. Making up the rest of the top five were the proximity to public transport, suitability for couples and suitability for families.

Despite many people’s lifestyles having changed during the pandemic, the survey continued to back up the fact that landlords weren’t overreacting to the pandemic and its effects.

Just 27% of landlords said that they took a property’s suitability for working from home into consideration when they were looking to purchase.

Similarly, just 17% stated that the proximity of a property to green space was a key attribute when it came to deciding whether to purchase or not.

This survey’s results suggest that the demand for urban housing will continue to be as strong as ever before.

This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.