In a promising sign for the property market, landlord confidence is on the rise, according to the latest research from Foundation Home Loans’ BVA BDRC Landlord Panel for the final quarter of 2023. Landlords are expressing increased optimism about capital gains, the private rental sector, and the broader financial market.
The report indicates that overall confidence in their lettings business remains stable for landlords. However, a slight dip in rental yields, the only metric to decrease quarter-on-quarter, has caught attention. This decline in rental yield confidence is attributed to a perceived decrease in tenant demand, marking the first such occurrence since Q2 2022.
The research highlights that 63% of landlords have reported increased tenant demand over the last three months, marking an 8% decrease from the previous quarter. This shift is primarily driven by a higher proportion of landlords expressing uncertainty, while only a minority (4%) report a decrease in demand. Regionally, the North West leads in the strongest increase in tenant demand, followed by Yorkshire and the Humber. However, the West Midlands reports a significant decrease of 26% quarter-on-quarter.
Despite the overall positive trend, the results indicate a more cautious landlord community. Larger portfolio owners are more likely to make a profitable, full-time living from their properties, and this proportion continues to grow with portfolio size. Conversely, landlords with only a single property display the least confidence in rental yields and the sector as a whole.
Grant Hendry, Director of Sales at Foundation Home Loans, commented on the findings, stating, “There is a renewed sense of calm and stability from these latest landlord results. While some concerns persist, it’s positive to see confidence rising across most metrics. After a challenging year in 2023, landlords remain somewhat cautious about the future, particularly regarding ongoing finance, tenant demand, rental yield, and capital increases.”
Hendry further highlighted the significant impact of high tenant demand, coupled with supply constraints and the need for landlords to cover larger mortgage costs, leading to substantial rent increases in many areas over the past 12 months.