Landlord confidence across a number of different metrics has improved over the course of the last quarter, with many anticipating continued increases in rental yield, a stronger performance from their own lettings businesses, capital gains across the portfolio, and a better private rental sector as a whole.
The latest Q3 2023 BVA BDRC Landlord Panel research report shows the landlord community responding positively to an increase in perceived tenant demand, and increasing optimism following the government’s September announcement not to take forward plans to introduce mandatory EPC levels at C and above for all PRS properties.
According to the report, 12% of landlords said the government announcement meant they would be “able to stay in the UK rental market”, although the most cited response was that it would have “no/very little impact” on their lettings businesses.
The research, comprising 785 online interviews with landlords, was undertaken on behalf of Foundation Home Loans, an intermediary-only specialist lender, between September and October this year.
After five consecutive increases from Q2 2022, the number of landlords who said they were planning to divest some, or all, of their portfolio in the next 12 months has dropped from 37% in Q2 to 28% in Q3.
While 8% of all landlords said they planned to increase the size of their portfolio over the next year, larger portfolio landlords said they would be more likely to purchase. Some 18% of landlords with over 20 properties said they would be adding to portfolios in the next 12 months.
As many as 71% of landlords surveyed 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 of 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%.
Grant Hendry, 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.
“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.”
Hendry added: “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.”