The proportion of landlords looking to expand their portfolio has dropped to an all-time low. It stands at 13% – the lowest it has been since research started in 2006.
This is despite measures of confidence stabilizing following last year’s fluctuations. Aside from landlords’ views of their own businesses, levels have returned to what they were in Q1 2016.
The quarterly BM Solutions / BDRC Continental Landlord Panel said the proportion of landlords feeling optimistic about the UK’s financial markets has more than doubled year on year. All other key confidence measures (capital gains, UK private rental sector (PRS) and rental yields) remain stable.
Landlords in the South East are most optimistic about the prospects of their own letting business, with 47% feeling ‘good’ or ‘very good’ about its prospects, followed by South West (44%). Landlords in Scotland and Wales are the least optimistic, with just over a quarter feeling positive (26%).
Tenant demand continues to soften during quarter one, with 17% of landlords reporting a decline – driven primarily by central and outer London (and to a lesser extent the North East), where the proportion of landlords reporting falling tenant demand now outnumbers those experiencing growth.
In central London almost twice as many landlords are now reporting a cooling in tenant demand compared to those reporting an increase.
However, the average portfolio has risen slightly to 8.1 properties (up from 7.1 properties in Q4 2016).
Phil Rickards (pictured), head of BM Solutions, said: “Despite signs of landlord confidence stabilising this quarter, fewer landlords are feeling optimistic about the prospects for their own businesses. This has driven down the number of those looking to expand their portfolio further to a new all-time low despite the average portfolio creeping up slightly.
“The impact of the tax changes has a natural link to landlord confidence, as the market landscape continues to be reshaped by changes in regulation.”
Perceived and planned rental increases are also down. Just under half (48%) of landlords are seeing rents rise in their area compared to 53% in Q4 2016. Just over four in 10 (42%) have increased rents across their own portfolio in the last year (down by 3% from Q4), with 32% intending to do so in the next six months (down 5% from Q4).
Rickards said the average rental yield remains stable – at 5.8% for the fourth consecutive quarter. “Overall, the market remains robust despite the changes in its environment, with rental yields remaining stable.”