2012-11-13 13:28:50 - Each quarter, through Young Index, Young Group polls investor sentiment among 500 of its Private Rented Sector (PRS) investment clients who hold UK property assets.
Appetite to Invest in the PRS
46.8% of the investors questioned are considering purchasing additional Private Rented Sector (PRS) assets in London over the coming 12 months. The data shows that investment appetite for London property has increased compared to Q3 2011, when it stood at only 38.7%. (fig 1.)
In regards to the rest of the UK only 27.1% of the surveyed landlords are considering purchasing assets elsewhere in the UK, though this is up from 19.7% from Q3 2011. London assets clearly remain more appealing to investors than those outside the capital but the data shows that there is still a healthy appetite for PRS assets in general.
Among those not actively considering investing in London, the top reason given
was due to the difficulty of acquiring financing, rather than a lack of confidence in the predicted asset performance.
The lack of interest in investing in assets outside of the capital can be attributed to the continuing belief that London leads the way in PRS asset performance.
94.3% of investors predict that the capital value of assets, in London, will increase over the next year. This is a increase in confidence in the London market of 16%, compared to this quarter last year. This statistic highlights the belief that the London PRS will continue to increase in value. (fig 2.)
Property values in London are expected to increase by an average of 1.8% between now and Q3 2013, whereas investors predict that values across the rest of the UK will fall by 1.1% over the same period.
When compared to this quarter last year the number of investors predicting a rent rise in London has risen by 10%, meaning that 84.5% of investors expect the rents in London to rise over the coming 12 months. Investors expect rent to increase by an average of 2.2%.
Sentiment for the strength of the rental market in the rest of the UK is static with 54.3% of respondents believing that the rates will stay the same while only 34.3% believe there will be an increase. The data collected shows that the average expected rent change, for the rest of the UK, will stagnate at 0.3%.
In this quarter’s data, 55.6% of respondents expected that, over the next 12 months, the Bank of England Base Rate would remain static at 0.5%. This is a 10% increase on Q3 2011.
Property Management Views
Annually in Q3, Young Group gauges investors’ view of the value of property management services and their impact on returns.
76.4% of respondents stated that they believe tenants pay more for living in a professionally managed property, while 89.3% believe that having professionally managed property leads to longer tenancy terms. 83.7% of landlords also believe that professional management of property enhances its capital value, a 11% increase on Q3 2011.
To increase the return received from a PRS asset landlords should be looking to minimising unnecessary expenditure, such as on repairs and maintenance.
94.3% of landlords believe their expenditure on maintenance is lower when their property is professionally managed, due to the fact that tenants take better care of the property.
Interestingly, 88% of the landlords questioned thought that professional property management is money well spent and 89.1% would recommend property management to a peer.
As the PRS continues to see an increase in demand, it is particularly heartening to see that professional property management – and its impact on asset value - is so highly regarded amongst the PRS investment community.
SNAPSHOT: PRS Investor Sentiment, Q3 2012
Professional Property Management
• 71.2% of landlords said that they employ an agent to manage their property
• 76.4% of landlords believe that tenants pay a higher rent for professionally managed property
• 89.3% of landlords believe that tenants stay for longer in a professionally managed property
• 94.4% of landlords believe that tenants in a professionally managed property take better care of a property
• 83.7% of landlords believe that professional management of property enhances its capital value
• 88% of landlords think professional property management is money well spent
• 89.3% of landlords would recommend professional property management to a peer
Long Term Focus
• 62.5% intend to hold their PRS assets for at least the next 10 years
• 30.6% of landlords intend to retain their property investments for the next 20 years or more
• 45.8% of Investors have already held their PRS asset for more than 10 years while 15.3% have held it for more than 20 years
• The average period that residential property investors expect to hold their PRS assets is 26 years
• 94.3% of respondents believe that London values will be at current levels or higher by this time next year
• For UK property outside of the capital, 54.6% expect values to be at current levels or higher by this time next year
Appetite for Investment
• 46.5% of investors are considering purchasing additional residential property assets within London over the next 12 months
• 27.1% of investors are looking at opportunities in the UK outside of the capital
• The Majority of landlords expect the Base Rate to hold steady at 0.5%