Confidence in three key metrics has seen the biggest falls year-on-year – that’s business expectations for the UK Private Rental Sector, UK Financial Markets and Own Letting Business.
Private landlords’ confidence is at the lowest level in almost 10 years, BDRC Continental’s latest quarterly Landlord’s Panel research released today reveals.
Mark Long, director at BDRC Continental, said: “There are few happy ever after tales here.
“Many private landlords in Britain are really concerned about the impact of the 2015 Budget when tax relief on private rental properties was cut, and given the housing shortage, the potential knock-on effect on renters and the supply of rental homes is something that we all need to care about.”
Confidence in three key metrics has seen the biggest falls year-on-year – that’s business expectations for the UK Private Rental Sector, UK Financial Markets and Own Letting Business.
The majority (59%) believe that the 2015 Budget will decrease their profitability.
At 81%, private landlords with 20+ properties are twice as likely as single property landlords to believe that they will experience a decrease in profitability as a direct result of last year’s Budget.
The comparable figures are 38% for one property portfolios, 53% for two to four properties, 68% for five to 10 properties, and 75% for 11-19 properties. For our “average” private landlord, 59% agree the 2015 Budget will negatively impact their profitability.
Just 39% of those with a buy-to-let mortgage rate their short-term prospects as good or very good, compared to almost half (48%) of landlords who are not leveraged.
‘Intentions to buy’ have returned to above ‘intentions to sell’ this quarter.
The trend of decreasing planned purchases and increasing planned sales seen in the previous six months has now reversed.
As BDRC Continental’s Mark Long explained: “This could indicate that the perceived impact of the Budget has softened slightly amongst some landlords, but amongst our respondents we saw some very strong feelings of disappointment and anger.”
A third (33%) of landlords are converting or considering converting to a Ltd Company.
One option to avoid paying higher Stamp Duty is to trade as a registered Limited Company. With one third already in the process or considering it, this number has declined from 41% in Q4 2015. The drop can be partly explained by 7% now already operating as a Limited Company. This trend is much higher amongst the largest portfolio landlords, where 22% are already incorporated and 6% are in the process of doing so.
Buy-to-let remains the dominant source of property acquisition funding. For borrowers the average amount outstanding on their mortgages is almost three quarters of a million pounds (£723,000). The amount outstanding varies significantly by portfolio size, with the largest portfolio landlords in the sample owing 30 times more than single property landlords. Some 1% owe more than £5m, although the largest proportion (32%) have loans of £199,999 or less.
Almost four in 10 (39%) private landlords report increasing demand for rental properties in the areas they operate in, up five percentage points from Q4 2015. Landlords with mid to large sized portfolios are particularly positive, with over 45% reporting increasing tenant demand.
Despite negativity, 72% of private landlords believe that investing in and renting property is better than other investments.
In terms of profitability, 25% agree with the statement “I make a profitable full-time living from letting” and 58% agree “Letting income supplements my ‘day job’ earnings”, with 13% breaking even, 3% making a small loss and just 1% admitting a “large loss”.
Long added: “Many Britons rely on the private rental sector – both the private landlords who invest in property and rent it out, and the millions of people who call those properties ‘home’. With almost a decade of data on the sector, and 36,000 interviews, we can identify trends and it’s clear that the current sentiment among private landlords is very low.
“Today’s industry event is about understanding the market, discussing the challenges and debating the future, based on the solid foundation of the view for this sector of the housing market from the grass roots up.”
