National Landlords Association talks down capital gains prospects as buy to let confidence soars
01-29-2015
Landlords' confidence in capital gains has risen from 18 to 52 per cent over the last two years, with a seven-fold increase in confidence in the UK's financial markets over the same period (up from 5 to 37 per cent).
However, the findings show that a third (32 per cent) of landlords say they might not be able to meet their mortgage repayments if interest rates were to rise in the near future.
Despite its findings the National Landlords Association (NLA) is looking to talk down capital gains prospects and has warned against relying on capital gains as a primary investment strategy.
The warning comes after the Financial Times recently reported the estimated capital growth of private rented housing stock to be of £177bn over just the last five years.
Carolyn Uphill, chairman, NLA said: "It certainly feels like a great time to be looking at buy to let a means of additional income but you cannot simply rely on the prospect of capital gains as an investment strategy.
"A lot is being made of capital growth but landlords must remember they are in the business of providing homes for people.
"It's a risky investment and the prospect of capital gains is only realised if and when the property is sold," she continues.
"With house prices levelling off and inevitable rises to interest rates as the economy improves, anyone considering investing in buy to let should think carefully before taking the plunge.
"This means planning for the long term and looking to sustainable yields, not hoping for a windfall in capital appreciation."
The news comes as the NLA launches the second part of its latest campaign; rent, risk resolve, which aims to highlight the potential risks of rising interest rates.
To accompany the campaign the NLA has produced a guide on how to prepare for rising interest rates.
For more information, or to download the guide, visit www.landlords.org.uk/ rentriskresolve