After five consecutive rises 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 the three months to September.
Meanwhile, 8 per cent of landlords interviewed said they planned to increase the size of their portfolio over the next year. Some 18 per cent of landlords with over 20 properties said they would be adding to portfolios in the next 12 months.
The research, carried out by BVA BDRC on behalf of Foundation Homeloans, comprised 785 online landlord interviews.
The findings highlighted that as tenant demand had risen, and following the government’s decision to scrap Energy Performance Certificate (EPC) targets, landlords’ confidence has increased.
Many landlords are anticipating continued increases in rental yield, a stronger performance from their own letting businesses, capital gains across the portfolio, and a better private rental sector as a whole.
Some 12 per cent of landlords said the government’s EPC announcement meant they would be ‘able to stay in the UK rental market’, although the most cited response was that it would have ‘none or very little impact’ on their lettings businesses.
Foundation Homeloans said the fall in the number of those landlords planning to divest, coupled with larger portfolio landlords seeking to acquire properties, stemmed largely from perceived tenant demand.
More than 70 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.
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 per cent to 5.3 per cent.
Landlords in the East Midlands reported the highest rental yields this quarter at 6.5 per cent.
Those in both outer and central London achieved the lowest yields, sitting below 5 per cent. Landlords with the largest portfolios achieved the highest rental yields at 6 per cent on average.
Landlords more optimistic for the future
Grant Hendry, director of sales at Foundation Homeloans, said: “It’s clearly good news to see a significant shift in positivity from landlords across a number of aspects, and to see confidence having risen quarter-on-quarter.
“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, with more competitive rates meaning stronger affordability.
“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 invested in the sector.”
Hendry said that it was too early to tell if the positive sentiment was the start of a new trend but landlords appeared to be feeling more optimistic about their future.
