Investors positive about Private Rented Sector investment

For the first time since Q4 2007, more respondents are considering making overseas purchases (29%) than making purchases in the UK’s regions.

Of those not considering additional PRS acquisitions over the coming 12 months, the overwhelming majority state finance-related issues as the principal factor in their reticence to invest.

Perhaps unsurprisingly, respondents believe that prospects for capital growth and rental income in London outshine those across the rest of the UK.

Over the past two years, respondents’ expectations of capital value movements have fluctuated somewhat, but the trends over that period for property within, and outside, the capital have continued to polarise.

Rental income is increasingly important to investors.  In Q2 this year, 20.7% cited it as more important to them than capital growth, against only 8.1% in Q1 2011.

Investors remain committed to the PRS; 94.5% have no intention of liquidating any PRS assets over the coming year.  Of those who do, the vast majority will liquidate for cash rather than another investment class.

34.5% of investors are intending to hold their properties for at least the next 20 years and 58.2% for the coming decade.

The average anticipated future hold period in Q2 2012 was 14.3 years and on average, investors have held PRS assets for 6.5 years.  It is clear that investing in the PRS is a long term position, borne out by the fact that 52.7% of investors are holding these residential property assets to bolster their pension provision.

Investors increasingly recognise the importance of property management in protecting and even enhancing asset value and income returns.  This quarter, 81.0% cited the burden of property management as the principal reason for using an agent to manage their portfolio.

In Q1 this year, the percentage of investors predicting that the Bank of England base rate would remain static for the forthcoming 12 months fell by 14.4% from 58.3% to 43.9% as confidence in the economy’s recovery grew.

However, in Q2, sentiment has turned; 65.5% now expect the base rate to remain stable at the historic low of 0.5% through to Q2 2013.  Even accounting for those who think a rise will occur before this time next year, the average base rate expectation stands at just 0.57%.

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