Landlords are currently experiencing a boost in confidence, as indicated by the most recent quarterly sentiment survey. The Q3 2023 BVA BDRC Landlord Panel research report for Foundation Home Loans provides valuable insights into this positive trend. This survey marks the first one conducted since the government decided to delay the elimination of Section 21 until court reforms are implemented. Additionally, there’s a step back from the initially proposed stricter mandatory EPC levels.
This change in sentiment is noteworthy and is reflected in the responses gathered, showcasing a more optimistic outlook among landlords in the current quarter.
Approximately 12 percent of landlords participating in the survey highlighted the significance of the EPC U-turn, expressing that it influenced their decision to remain active in the rental market. Interestingly, the current quarter showcases a shift in trends, marking a decline in the figures indicating landlords contemplating an exit from the sector. This shift is notable, with the percentage dropping from 37 percent in the second quarter (Q2) to a more optimistic 28 percent in the third quarter (Q3).
Delving into the expansion plans within the landlord community, it is observed that 8 percent of all landlords are gearing up to increase the size of their property portfolios over the next year. Noteworthy, however, is the distinction among larger portfolio landlords, where a substantial 18 percent of those owning 20 or more properties expressed their intent to add to their portfolios in the coming year.
The landscape of tenant demand is undergoing a notable transformation, with a striking 71 percent of landlords reporting an increase. This reflects a 4 percent rise since the last quarter and stands as an all-time high in reported tenant demand. On the flip side, a mere 3 percent of landlords noted a decrease in tenant demand, further emphasizing the prevailing positive trends in the rental market.
The uptick in tenant demand, combined with an ongoing shortage of private rental stock, resulted in a five percent increase in the proportion of landlords witnessing rising rents over the past year compared to the last quarter. The rental yield has also seen a slight increase quarter-on-quarter, reaching 5.3 percent.
Grant Hendry, the director of sales at Foundation Home Loans, comments on the situation, stating, “When landlords assess the performance of their portfolios and consider their optimism for the future, there are undoubtedly numerous factors to consider. However, it’s encouraging to note a significant shift in positivity among landlords across various aspects and an increase in confidence from the previous quarter.
“Undoubtedly, the strong overall demand from tenants is a significant factor in this shift, possibly along with the belief that mortgage rates may have plateaued, and the market is showing signs of a southward shift, with more competitive rates contributing to enhanced 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.
“The number of landlords saying they plan to divest over the next 12 months has fallen, and this may partly be due to the retraction of the energy efficiency regulations for the PRS, but this should not detract from the need for rental properties to be as energy-efficient as possible, particularly in light of the increased utility bills all households have suffered in recent years.
“While it is too early to say whether we are seeing the start of a new trend line, there appear to be many more landlords feeling optimistic about their future within the PRS, and if this means landlords can keep much-needed housing supply available to tenants, then this can only be viewed as a positive.”
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