Rise in landlord numbers could slow rent rises

Proportion of potential landlords looking to invest for the first time is at its highest level for more than a year

The property supply shortage in the rental sector could ease this year as more private landlords plan to invest in the buy-to-let sector, according to the latest figures from Rightmove.

They argue that a rise in the number of landlords is likely to have a cooling effect on rental price growth.

"Buy-to-let investors, attracted by evidence of sustained demand and strong yields, will provide much needed supply relief to ‘Generation Rent’," said Miles Shipside, director and housing market analyst at Rightmove. "A marketplace where landlords are achieving satisfactory returns will relieve some of the supply pressure in 2013, though the task seems to be falling on the comparatively rag-tag army of private landlords rather than more strategic institutional investment.”

The research also suggests that many accidental landlords - owner-occupiers who only move into renting due to a poor sales market or other circumstance - are keen to abandon their ‘amateur’ status and invest further. One in eight accidental landlords has been so pleased by their success that they now want to build a portfolio by buying more property to let.

Accidental landlords make up around 30 per cent of all private landlords. The proportion of landlords looking to invest for the first time is now at its highest level for more than a year at 44 per cent.

Separate research by Rightmove shows that 74 per cent of professional landlords also aim to increase their rental portfolio in the next year. Around 88 per cent of landlords surveyed report that they are looking for 5 per cent as the minimum average return on their rental investment. Rightmove's figures show that current average yields in the UK are 5.73 per cent.

“In locations where property prices have fallen substantially or rents have risen more dramatically, landlords have invested and many seem willing to invest again," said Shipside. "Some higher priced areas remain unattractive to the hard-nosed investor or risk-averse lenders. Those areas will continue to see the supply of rental property outstripped by demand putting further upwards pressure on rents. However, overall greater supply of rental property coming on tap is good news for tenants as it is likely to lessen the pace of rental growth in 2013.”