According to the latest research by BVA BDRC, the confidence of landlords has significantly improved in the past quarter. The report, commissioned by Foundation Home Loans and comprising 785 online interviews with landlords, unveils a positive shift in various metrics driving a newfound optimism among property owners.
One of the primary reasons for this surge in confidence is the noticeable rise in tenant demand. Landlords are witnessing robust performance within their letting businesses, resulting in increased rental yields and an overall improvement in the private rental sector (PRS).
A key indicator of this burgeoning confidence is the government’s recent decision not to proceed with plans to enforce mandatory Energy Performance Certificate (EPC) levels at C and above for all PRS properties. This announcement was received positively by 12% of landlords, who expressed their intent to continue operating within the UK rental market.
The research indicates a decline in the number of landlords considering divesting their portfolios. In Q2, 37% had plans to divest, which decreased to 28% in Q3. Moreover, a notable 8% of landlords plan to expand their portfolios in the upcoming year. Larger portfolio landlords, in particular, expressed greater interest in property acquisition, with 18% of those owning over 20 properties looking to bolster their portfolios.
Foundation Home Loans’ director of sales, Grant Hendry, highlighted the significance of this shift, emphasizing the role of heightened tenant demand in reshaping landlord sentiment. He pointed out that 71% of landlords reported an upsurge in tenant demand, marking a 4% increase from the previous quarter and reaching an all-time high.
The report also underscores a rise in rental yields, up by 0.1% to an average of 5.3% quarter-on-quarter. The East Midlands emerged with the highest rental yields at 6.5%, while London, both outer and central, recorded yields below 5%. Larger portfolio landlords topped the charts with an average yield of 6.2%.
Hendry cautiously suggested that this upswing might signify a changing trend, fuelled by strong tenant demand and potentially stabilized mortgage rates. He believes that this optimism among landlords bodes well for the PRS, ensuring a consistent housing supply for tenants, ultimately benefiting the market.
While it remains early to predict the trajectory definitively, this palpable surge in landlord confidence signals a positive trajectory for the future of the rental market, fostering optimism for both landlords and tenants alike.