Research from Foundation Home Loans, which interviewed 398 online interviews with landlords, shows that landlord confidence in their lettings business has stayed stable, while rental yield confidence has fallen slightly quarter-on-quarter.
The fall in rental yield confidence comes from the “perception that tenant demand” has fallen for the first time since Q2 2022.
Around 63 per cent of landlords have said that tenant demand has gone up in the last three months, a decrease of eight per cent on the previous quarter. This was driven by a higher proportion saying they are unsure and only four per cent are saying demand has gone down.
‘More cautious landlord community’
The report said that the results show a “more cautious landlord community” and those with larger portfolios are more likely to make full-time profitable living from properties, which goes up with the size of the portfolio.
Landlords with only one property have the least confidence in terms of rental yields and the PRS.
Planned divestments are lower than those reported in the first half of the year, and those planning to buy have gone up by three per cent.
Landlords with the largest properties are more likely to buy at 19 per cent.
Majority of landlords think EPC legislation will return
Approximately 64 per cent of all landlords said they were satisfied that the government had put off mandatory Energy Performance Certificate (EPC) levels of C or above for the PRS by 2028.
This goes up to 80 per cent for those who own 11-plus properties.
Around three out of four landlords expect the legislation to be introduced in the future, on average, and expect this to be done in three-and-a-half years.
Grant Hendry (pictured), director of sales at Foundation Home Loans, said there was a “renewed sense of calm and stability from these latest set of landlord results, and while it’s clear there are still some considerable concerns for active participants in the PRS, it’s positive to see confidence generally rising across most of the metrics”.
“After a very challenging year in 2023, it’s perhaps not surprising to see landlords being somewhat cautious about what the future might bring, particularly in terms of ongoing finance, but also tenant demand, rental yield, and capital increases.
“Clearly, tenant demand has been running at very high levels and, coupled with the supply situation and the need for landlords to cover larger mortgage costs, has meant rents have risen significantly in many areas over the past 12 months,” he added.
Hendry said that those fundamentals were not changing, but have “clearly steadied somewhat” and there will “continue to be a large number of landlord borrowers coming off their deals throughout 2024 and beyond”.
He continued that as the rate environment has “shifted”, this will hopefully allow them to meet affordability criteria, secure the loans they need and keep mortgage payment increases down.
Hendry added that it was unsurprising that portfolio landlords were “more inclined to be active with their properties”, whether in terms of divestment or acquisition, and smaller landlords were less inclined to act and wanted to wait things out.
He said that it was interesting to hear that many landlords expect minimum EPC levels to be introduced by the government.
“That will require work, and funding to carry out this work, and it therefore looks likely landlords will be seeking options in the green space to allow them to improve their properties, and to benefit from the lower rates that are now available for greener PRS properties,” Hendry said.
