Landlord confidence has improved across all metrics year-on-year, with many feeling confident about the opportunity for capital gains on their properties, the private rental sector (PRS) as a whole, and the UK financial market.

These results come from the latest Q4 2023 BVA BDRC Landlord Panel research report and continue to show a positive score for landlord optimism following on from Q3 last year, prior to which there was a year of negative scores.

Quarter-on-quarter results reveal landlord confidence in their own lettings business remains stable, with rental yields the only metric of the five to dip quarter-on-quarter. The fall in rental yield confidence stems from a perception that tenant demand has decreased for the first time since Q2 2022.

Some 63% of landlords now report increased tenant demand in the last three months, down by 8% on the previous quarter; this is primarily driven by a higher proportion of landlords reporting they are ‘unsure’; only a minority at 4% report decreasing demand.

Regionally, landlords in the North West report the strongest increases in tenant demand, followed by Yorkshire and the Humber; landlords in West Midlands reported a notable decrease, down by 26% quarter-on-quarter.

The research, comprised of 398 online interviews with landlords, was undertaken on behalf of Foundation Home Loans, the intermediary-only specialist lender, during December.

The latest results show a more cautious landlord community. Those with larger portfolios are much more likely to be making a profitable, full-time living from their properties, and the proportion of those able to do this continues to increase in line with the size of the portfolio.

Those landlords who only own a single property are reported to have the least confidence in terms of rental yields and the PRS as a whole.

Landlords are however showing less inclination to divest some, or all, of their properties. Planned divestment now sits lower than the figures reported in H1 last year, while those planning to acquire property has increased by 3%; again, landlords with the largest properties continue to be most likely to acquire at 19%.

As reported in the last iteration of the survey results, landlords seem – on the whole – pleased with the Government’s decision to put off mandatory EPC levels of C and above for PRS properties by 2025/2028. 64% of all landlords said they were satisfied, rising to 80% for those who own 11-plus properties.

However, three out of four landlords still expect the legislation to be introduced in the future; on average, they anticipate this will be done in three and a half years

Grant Hendry, director of sales at Foundation Home Loans, said: “There is a renewed sense of calm and stability from these latest set of landlord results, and while it’s clear there are still some considerable concerns for active participants in the PRS, it’s positive to see confidence generally rising across most of the metrics.

“After a very challenging year in 2023, it’s perhaps not surprising to see landlords being somewhat cautious about what the future might bring, particularly in terms of ongoing finance, but also tenant demand, rental yield, and capital increases.

“Clearly, tenant demand has been running at very high levels, and coupled with the supply situation and the need for landlords to cover larger mortgage costs, has meant rents have risen significantly in many areas over the past 12 months.

“Those fundamentals aren’t really changing, but they have clearly steadied somewhat, and while there will continue to be a large number of landlord borrowers coming off their deals throughout 2024 and beyond, the rate environment has shifted which should hopefully allow them to meet affordability criteria, secure the levels of loans they need and keep any increases in mortgage payments down.

“Overall, again it’s unsurprising to see it is portfolio landlords who are more inclined to be active with their properties, whether in terms of divestment or acquisition, while those landlords with just a small number of properties may feel less inclined to do anything just yet, and prefer to wait things out.

“Finally, it is interesting to hear that most landlords believe a future government is likely to introduce the minimum EPC levels, which were recently canned by this administration. According to the survey, 36% of rental properties have an EPC rating of below C currently, and this landlord cohort tends to believe they will have to improve this, possibly in just over three years’ time.

“That will require work, and funding to carry out this work, and it therefore looks likely landlords will be seeking options in the Green space to allow them to improve their properties, and to benefit from the lower rates that are now available for greener PRS properties.”