Landlords in the UK are experiencing a surge in confidence, as indicated by the latest findings from the 2023 BVA BDRC Landlord Panel research report. The report reveals an optimistic sentiment among landlords concerning capital gains on their properties, the private rental sector (PRS), and the broader UK financial market.
The positive trend in landlord confidence has persisted since the third quarter of the previous year, marking a noteworthy turnaround from a year of negative scores. The quarterly analysis shows overall stability in landlords’ confidence in their own lettings business, with rental yields being the only metric to experience a dip.
The decline in rental yield confidence is attributed to a perceived decrease in tenant demand, marking the first decline since Q2 2022. Approximately 63% of landlords report increased tenant demand in the last three months, a decrease of 8% from the previous quarter. The uncertainty surrounding demand is highlighted by a higher proportion of landlords reporting they are ‘unsure,’ while only a minority, at 4%, report decreasing demand.
Regionally, landlords in the North West report the most significant increases in tenant demand, followed by Yorkshire and the Humber. In contrast, the West Midlands witnesses a notable decrease, down by 26% quarter-on-quarter.
The research, consisting of 398 online interviews with landlords, was conducted on behalf of Foundation Home Loans, the intermediary-only specialist lender, in December.
The latest results depict a more cautious landlord community. Larger portfolio owners are more likely to make a profitable, full-time living from their properties, with the proportion of those achieving this increasing in line with the size of the portfolio. Conversely, landlords with a single property exhibit the least confidence in terms of rental yields and the PRS as a whole.
While there is less inclination among landlords to divest some or all of their properties, planned divestment is lower than figures reported in H1 last year. Simultaneously, those planning property acquisitions have increased by 3%, with portfolio landlords being the most likely to acquire at 19%.
Landlords generally express satisfaction with the government’s decision to postpone mandatory Energy Performance Certificate (EPC) levels of C and above for PRS properties by 2025/2028. Of those surveyed, 64% of all landlords said they were satisfied, rising to 80% for those who own 11 or more properties.
Despite this satisfaction, three out of four landlords anticipate the introduction of such legislation in the future, with an average expectation of around three and a half years.
Grant Hendry, Director of Sales at Foundation Home Loans, commented on the current data, noting a renewed sense of calm and stability among landlords. Hendry highlighted the positive trend in confidence across various metrics, emphasizing that portfolio landlords are more inclined to be active with their properties.
In conclusion, the survey suggests that landlords foresee a future government introducing minimum EPC levels, despite the recent postponement by the current administration. With 36% of rental properties currently having an EPC rating below C, landlords anticipate the need to improve this in just over three years, potentially seeking options in the Green space to enhance their properties and take advantage of lower rates available for greener PRS properties.