Landlord confidence has continued to increase across a number of different metrics over the last quarter as tenant demand rose, research from BVA BDRC has revealed.
The research, titled Q3 2023 BVA BDRC Landlord Panel research report, showed a landlord community “responding positively” to an increase in perceived tenant demand.
This positivity was also attributed to the government’s September announcement not to take forward plans to introduce mandatory EPC levels at C and above for all private rental sector properties.
As a result of this announcement, 12 per cent of landlords said they would be “able to stay in the UK rental market”.
However, the most cited response was that it would have “no/very little impact” on their lettings business.
Grant Hendry, director of sales at Foundation Home Loans said: “Certainly, overall strong tenant demand is playing a major part here, as perhaps is the belief that mortgage rates may now have topped out, and that the market is finally shifting southwards.
“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 in the sector.
“The number of landlords saying they plan to divest over the next 12 months has fallen, and this may partly be due to the retraction of the energy efficient regulations for the PRS.”
However, Hendry cautioned that this should not detract from the need for rental properties to be as energy-efficient as possible.
“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,” he added.
“If this means landlords can keep much-needed housing supply available to tenants, then this can only be viewed as a positive.”
Portfolios
Additionally, the research found that 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 per cent in Q2 to 28 per cent in Q3.
Meanwhile 8 per cent 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.
An additional 18 per cent of landlords with over 20 properties said they would be adding to portfolios in the next 12 months.
Foundation said the fall in the number of those landlords planning to divest, coupled with larger portfolio landlords seeking to acquire, stemmed from a number of key factors, particularly perceived tenant demand.
Additionally, 71 per cent of landlords surveyed reported an increase in tenant demand, up by 4 per cent since the last quarter and reaching an all-time high. Only 3 per cent of landlords reported a decrease in tenant demand.
Rental yield
The increase in tenant demand, coupled with ongoing supply of PRS properties, meant that the proportion of landlords who had seen rising rents in the last year was up 5 per cent on the last quarter’s results.
Rental yield also increased quarter-on-quarter, up by 0.1 to 5.3 per cent.
Landlords in the East Midlands reported the highest rental yields in Q3 at 6.5 per cent, while those in London achieved the lowest yields of below 5 per cent.
Landlords with the largest portfolios achieve the highest rental yields at 6.2 per cent on average.
tom.dunstan@ft.com
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