Landlord confidence across a number of different metrics has improved over the course of the past quarter, with many anticipating continued increases in rental yield and a better private rental sector (PRS) as a whole.
These results came from the latest Q3 2023 BVA BDRC Landlord Panel research report, showing a landlord community responding positively to an increase in perceived tenant demand, and potentially as a reaction to the Government’s September announcement not to take forward plans to introduce mandatory EPC levels.
12% of landlords said the Government announcement meant they would be able to stay in the rental market, although the most cited response was that it would have little to no impact on their lettings businesses.
The research, comprising 785 online interviews with landlords, was undertaken on behalf of Foundation Home Loans, the intermediary-only specialist lender, between September and October this year.
After five consecutive increases from Q2 2022, the number of landlords who were planning to divest some, or all, of their portfolio in the next 12 months, dropped from 37% in Q2 to 28% in Q3.
While 8% of all landlords planned to increase the size of their portfolio over the next year, larger portfolio landlords were more likely to purchase.
18% of landlords with more than 20 properties said they would add to their portfolios in the next 12 months.
Foundation said the fall in the number of those landlords planning to divest, coupled with larger portfolio landlords seeking to acquire, stemmed from a number of key factors, particularly perceived tenant demand.
The majority (71%) of landlords reported an increase in tenant demand, up by 4% since the last quarter and reaching an all-time high.
Only 3% of landlords reported a decrease in tenant demand.
The increase in tenant demand, coupled with ongoing supply issues with PRS properties, meant the proportion of landlords who had seen rising rents in the last year was up 5% on the last quarter’s results.
Rental yield also increased quarter-on-quarter, up by 0.1% to 5.3%.
Landlords in the East Midlands reported the highest rental yields at 6.5%, while those in London achieved the lowest yields, sitting below 5%.
Landlords with the largest portfolios achieved the highest rental yields at 6.2% on average.
Foundation Home Loans offers a range of specialist buy-to-let mortgages available to individual and portfolio landlords, and those buying or remortgaging via limited companies.
Grant Hendry (pictured), director of sales at Foundation Home Loans, said: “There are clearly a large number of factors for each individual landlord to take into account when looking at the performance of their own portfolio, and their optimism – or otherwise – for the future.
“However, it’s clearly good news to see a significant shift in positivity from landlords across a number of aspects, and to see confidence having risen quarter-on-quarter.”
He added: “Certainly, overall strong tenant demand is playing a major part here, as perhaps is the belief that mortgage rates may now have topped out, and that the market is finally shifting southwards, with more competitive rates meaning stronger affordability.
“The Government’s announcement on minimum EPC levels not moving up to C and above was perhaps a relief to many, particularly in the short-term, and for a number it may make the difference in terms of them staying invested in the sector.
“The number of landlords saying they plan to divest over the next 12 months has fallen, and this may partly be due to the retraction of the energy efficiency regulations for the PRS, but this should not detract from the need for rental properties to be as energy-efficient as possible, particularly in light of the increased utility bills all households have suffered in recent years.”
Hendry concluded: “While it is too early to say whether we are seeing the start of a new trend line, there appear to be many more landlords feeling optimistic about their future within the PRS, and if this means landlords can keep much-needed housing supply available to tenants, then this can only be viewed as a positive.”
