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Landlords continue to target urban locations for buy-to-let purchase 

Nearly seven out of 10 landlords will continue to target property in urban areas for their next portfolio purchase, Paragon Bank research has found.

Paragon’s research of 846 landlords, conducted by BVA BDRC, found that 16% of landlords plan to buy an average of 2.2 properties in the next 12 months. Of those looking to purchase, 68% are looking at buying in urban areas, despite reports of tenants looking to leave built-up city and town centres.

Over a third (36%) plan to buy in a suburban area and 6% are looking at rural locations. Two thirds (66%) of landlords said they plan to buy in the same area as their existing properties, with 10% targeting new areas. A fifth (20%) said it would be a mixture of both.

Richard Rowntree, Paragon Managing Director for Mortgages said: “This research supports a notion that we have put forward throughout the pandemic; 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.

“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.”

Reflecting this strategy for investment in more densely populated areas, terraced houses were cited as the property type that half of landlords plan on purchasing. Semi-detached houses was the next most popular type - the target of 37% of planned purchases - and flats were the third most popular property purchase type at 26%.

Landlords were also asked what key attributes they will be looking for in any new investment properties. Potential for rental yield was the most important aspect, chosen by 77% of landlords, followed by the potential for adding value which was a key attribute for 59%.

Making up the top five most important property characteristics were the proximity to public transport, suitability for couples and suitability for families.

Attributes that have risen in prominence as a result of the Covid-19 pandemic were less of a priority for landlords. Suitability for home working was selected by 27% of landlords and proximity to green space was near the bottom of the list after being picked by 17% of those who plan to invest in the next 12 months.

Richard Rowntree concluded: “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.”

Paragon Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England number 05390593. Registered office 51 Homer Road, Solihull, West Midlands B91 3QJ. Paragon Bank PLC is registered on the Financial Services Register under the firm reference number 604551