2013-12-24 13:19:46 - Young Index is a quarterly gauge of market sentiment within the Private Rented Sector that polls Young Group’s client base of over 1000 active investors and landlords who hold UK residential investment property.
Our Q4 2013 report found that London continues to lead the way for Private Rented Sector investment appetite, capital value outlook and future income expectation.
Our latest Young Index survey has shown that there is a continued strong positive sentiment for the London Private Rented Sector (PRS) but it has also highlighted the growing belief that many have in the PRS for the rest of the UK.
Of those who responded to our survey, 59.6% have already held their property assets for 10 or more years while 15.6% have held them for 20+ years. The average expected future hold period of a responding landlord is 16.9 years.
93.5% of active investors expect that capital values in London will increase throughout 2014 while 96.7% of respondents believe that UK property, outside of London, will experience positive capital growth. This is a 46.7% increase on Q4
Also, for the first time, there is stronger belief in the potential growth of capital values outside of London than there is for the Capital. (Figure 1)
This may be due to the fact that, even during the economic downturn, London property increased in capital value so the rest of the UK is in the process of catching up.
RENTAL MARKET STRENGTH
When looking at rental income expectations we can see the positive sentiment towards London’s PRS continues. 93.6% of investors expect to see an increase in the rental income generated from their London property portfolios in 2014.
90.3% of respondents expect rents outside of the Capital to increase. A jump in positive sentiment of more than 40% from Q4 2012.
London is still considered a safe haven for property investment but, as the economy recovers, areas outside of the Capital are now seen as being able to provide increasing returns on investment too.
COMMITMENT TO THE PRS
Investors remain committed to the PRS; 96.5% of respondents have no intention of liquidating any PRS assets during 2014. Those that are planning to sell will do so to unlock their cash value.
81.3% of investors intend to hold their assets for more than 10 years with the average anticipated future hold period increasing from 10.9 years (Q4 2012) to 16.9 years.
The continued positive sentiment for PRS assets has led 55.6% of respondents to indicate that they are considering adding further London property assets to their portfolios.
Compare this to the 28.6% indicating they will be considering property elsewhere in the UK and we see that London is still seen as a safe haven for PRS investment. (Figure 2).
Due to the upturn in fortunes of the UK economy only 37.5% respondents expect the Bank of England base rate to remain at 0.5% throughout 2014.
The remaining respondents (62.5%) believe that the base rate will increase, with the majority (68.4%) believing it will rise to 0.75%.
Against the current economic backdrop, only 9.7% of investors re-mortgaged an existing PRS asset during 2013, while 16.1% purchased additional investment property.
Mortgage availability remains a principal concern for investors while the majority (35.7%) of respondents would like to see a stamp duty break for all purchasers.
7.1% of those polled considered stable house prices to be the most important thing for them in the coming months while 10.7% would like to have greater job security.
REGULATION OF THE PRS
Regulation of the Private Rented Sector continues to be a hot topic so, once again, we polled landlords on their views of PRS regulation. The majority (36.7%) believe there is currently adequate regulation of the PRS.
3.3% (down 13.8% on Q4 2012) believe that only lettings agencies should be compulsorily regulated by a Government body, while 26.7% think the compulsorily regulation should be handled by an industry body.
16.7% of those polled believe that both landlords & letting agencies should have to sign up to be compulsorily regulated by an industry body, while 13.3% believe it should be handled by a Government body.
The information from this latest Young Index paints a picture of there being positive investor sentiment for the future of the PRS and that many within the industry believe the PRS, throughout the UK, will continue to go from strength to strength in the year ahead.