Blog: Varied property portfolios are the way forward

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As a landlord myself, would I have any qualms about purchasing a bungalow to rent? Well, I’ll let you into a little secret, I’m currently renting out a bungalow to a family. Now, in all honesty, a bungalow probably wouldn’t have immediately sprang to mind as the property type of choice when adding to my portfolio. However, because I knew that this would fit their requirements perfectly, this became a sensible option. Plus, the sums all added up and it was in the right location.  

But why am I focusing on bungalows I hear you cry? Well, if recent research by Paragon Bank is anything to go by then almost one in 10 rented homes in the UK could be a bungalow in the next 10 years.  

A survey of over 1,300 tenants in the private rented sector (PRS) showed that whilst 3% of people currently live in a bungalow, 9% of respondents expect to rent this type of property in 10 to 15 years’ time. Further analysis conducted on behalf of Paragon Bank by the Social Market Foundation found that homes headed by a person over the age of 55 will account for over a quarter of all privately renting households by 2035. 

The government’s English Housing Survey shows that there are currently 141,000 bungalows in the PRS in England, representing 3.3% of the total number of rented homes. Buy-to-let lending figures have highlighted strong growth in the number of bungalows purchased by landlords over the past five years, although these still remain low as a proportion of total properties acquired. Last year, landlords purchased 3,370 bungalows with a buy-to-let mortgage, compared to 1,844 in 2017. 

It’s no secret that people are living for longer or that bungalows are often associated with the ageing generations, and there’s no denying that they offer a more practical living space for those who may not be as mobile as they once were.  

The profile of tenants is also getting older. Some elements of the older generation who have made substantial equity gains from their properties due to escalating house prices are cashing in and moving into rental accommodation to bolster pension pots or help family members to get onto or move up the property ladder. Other reasons could be to downsize, to move closer to their families without the hassle of going through the homebuying process or to simply lower the maintenance and responsibilities regarding their homes.  

From a landlord’s perspective, and I’m speaking very generally here, bungalows can come with larger plots which could offer greater flexibility when it comes to future development opportunities for landlords or address a more pressing matter of meeting their tenants’ demands for more outside space in the here and now. 

What I’m trying to say is that as market dynamics and tenant profiles/demands continue to shift, so too must landlords’ approaches to their portfolios. Especially if, like me, they have the perfect tenant in mind or are simply ahead of the curve when it comes to these shifting dynamics – don’t worry my tongue is planted firmly in my cheek on this final point. 

The serious point here though is that, with many landlords benefiting from house price gains over recent years, it’s important to think carefully about if, how and where they reinvest. Operating a sole bungalow portfolio approach may not be the way forward, but having a balanced portfolio incorporating differing property types could certainly pay dividends from a risk perspective and generating strong returns over time. 

Cat Armstrong is mortgage club director at Dynamo for Intermediaries 

 

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