All the five key areas landlords were quizzed on were at their lowest levels in seven years.
The BVA BDRC Landlords Panel surveyed over 700 active landlords in Q2 2019 using five confidence indices – capital gains, rental yields, UK financial market, UK private sector and own letting business.
Confidence in capital gains fell to 23 per cent in the quarter, from 32 per cent in Q2 2018, and prospects for rental yields dropped 10 per cent from 49 per cent in the second quarter of 2018 to 39 per cent in the second quarter 2019, the lowest recorded in more than nine years.
More broadly, confidence in the sector and economy overall declined with just 15 per cent optimistic about the UK private rented sector, down from 21 per cent a year ago, and only 11 per cent optimistic about the UK financial market, down from 15 per cent in Q2 2019.
Damian Thompson, director of mortgages, Aldermore said: “The private rented sector plays a significantly important part of the UK housing market, so it is concerning many landlords have a bleak outlook at the moment. We however saw UK buy to let lending in 2018 increase four per cent on 2017, buoyed by remortgaging, and 2019 lending has been on par with these volumes.
“The rise in activity would suggest the market is not necessarily in decline but in a state of change as landlords diversify their needs away from a growth strategy and the sector adjusts to the gradual shift towards professionalisation.”
He continued to say that the increase in regulatory measures and “more complicated mortgage applications” meant specialist lenders would become “more vital” in easing the mortgage process.
Profitability stable, tenant demand up
The proportion of landlords making a profit fell by just one per cent in Q2 from Q1 2019 with only four per cent of landlords saying they were making a loss. Additionally, a third of landlords said they were able to make a full-time living off of their lettings, and 53 per cent were able to supplement their day job.
Tenant demand saw an increase, although there were variations between regions with over a third of landlords in Wales, East of England, Yorkshire and The Humber, West Midlands, East Midlands and the South West seeing an increase in demand.
London and the South East were the only regions where landlords were more likely to report decreases in demand, with Central London particularly affected as only 11 per cent of landlords with properties there cited an increase.
Overall, those perceiving a rise in tenant demand went up from 20 per cent to 23 per cent quarter-on-quarter, with families remaining the most common tenant types.
The data also indicated a shift toward professionalisation, with 55 per cent of potential buyers stating an intention to purchase within a limited company. The data showed that 26 per cent of landlords intended to sell at least one property in the next year, while one in seven landlords said they intended to purchase an additional property in that same time period.