Recent survey data released by The DPS has unveiled a marked divergence in the intentions of landlords based on the scale of their property portfolios, reshaping the landscape of the rental market.
The study highlights that a significantly higher proportion of landlords owning two or fewer properties are planning to exit the rental market compared to those with larger portfolios. Statistics reveal that 24.47% of small-scale landlords intend to sell up, while only 12.16% of those owning over ten properties have similar intentions.
Conversely, nearly three times the percentage of landlords with more than ten properties are planning to expand their portfolios compared to those with just one or two properties (13.51% vs. 5.63%).
A noteworthy revelation from the poll indicates that landlords not operating as a business for rental purposes are twice as likely to sell all their properties and exit the Private Rented Sector (PRS) compared to those managing a limited company (21.72% vs. 10.34%).
Matt Trevett, Managing Director at The DPS, emphasized, “The data indicates a distinct commitment disparity between larger-scale landlords and smaller property owners within the PRS. Larger-scale landlords, often organizing their businesses within limited companies, exhibit a more resolute dedication amidst market challenges influenced by high interest rates and tax reforms.”
The survey also underscores that landlords utilizing limited companies are considerably more inclined to expand their property portfolios compared to non-business-oriented counterparts (24.14% vs. 4.64%).
Additionally, a mere 8% of sole trader landlords intend to acquire more properties, with 21.72% of them contemplating an exit from the rental market altogether, The DPS highlighted.
Further insights from the research illustrate differing intentions between landlords renting out former residences versus those who bought properties explicitly for rental purposes. Landlords renting out their previous residences are twice as likely to plan a complete exit from the market (35.80% vs. 18.08%), while those who initially invested in rental properties express a stronger inclination to expand their portfolios (9.12% vs. 4.32%).
A concurrent survey among letting agents’ clients by The DPS found that 28% believe larger landlords frequently acquire properties from individuals with smaller portfolios. Moreover, 36% perceive a rising trend of landlords establishing formal businesses for rental operations.
Commenting on this trend, Paul Fryers, Managing Director at Zephyr Homeloans, noted, “The prevalent utilization of company structures among landlords to manage costs has become standard practice. Escalating interest rates, exemplified by a surge from 4.38% to 6.22% on a typical five-year variable buy-to-let mortgage in the past year, necessitates thorough exploration of ownership options for landlords.”
The evolving landscape prompts a call for closer collaboration between brokers and landlord clients to navigate effective ownership strategies for existing portfolios and future property investments.