BVA BDRC research drawn from 752 online interviews with landlords at the end of last year showed many will be seeking to cut costs and look for specialist advice to help them on product selection, with profitability nudging down on the previous quarter.
According to the Q4 2022 BVA BDRC survey, rental yield and tenant demand remain firm, with yield softening by just 0.1 per cent to 5.7 per cent across the country.
Wales secured the strongest yield figures at 6.4 per cent by region, with Houses of Multiple Occupation (HMO) delivering the best return by property type at 6.4 per cent, followed by multi-unit blocks (MUBs) at 6.2 per cent.
Demand in capital remains high
Regionally, Central London landlords reported the strongest tenant demand, but across a number of regions this appetite has fallen including the North West, West Midlands, the South East and Outer London.
One in four landlords reported a property without tenants in the preceding three months. Also, the typical void period fell by an average of 12 days to 70, suggesting it was easier for landlords to fill properties than at any point in the last six years.
On profit, 81 per cent of landlords said their lets continued to make a return, down five per cent on the figure from the previous quarter, however for those landlords who have four to five properties, this rose to 90 per cent. Overall, however, the profitability figures fell six points quarter on quarter, due to a larger number of landlords reporting financially ‘breaking even’ on their investments.
Rental rises this year
Foundation said a greater number of landlords will choose to raise rents in 2023, with larger landlords likely to be the most aggressive in this, with 20 per cent more likely than average to levy an increase in the first half of the year, typically by 7.7 per cent.
Landlords cited increased running costs as the most common driver for rental increases, while 61 per cent said the increases were to align with the local market. Just under half, or 47 per cent, reported rising mortgage costs driving the rental uplift, up from 41 per cent in Q3 2022.
George Gee, managing director (commercial) (pictured) at Foundation Home Loans, said: “There are some very positive fundamentals here, particularly for professional and larger portfolio landlords, in terms of stable rental yields, strong tenant demand, and ongoing profitability of portfolios.”
He added: “This research was undertaken soon after the mini Budget, and we’ve already seen the market much calmer since then, which we hope will feed into landlords’ views looking forward.
“Overall, the market for refinance in particular remains strong, and as many more landlords will require the insight of their mortgage advisers when they come to remortgage their properties. Understandably many landlords are unsure about what product is best for them, and this presents a clear and obvious opportunity for advisers to touch base with existing clients as well as those who might ordinarily seek to secure their next mortgage via direct means.”
