Concerns over sector challenges remain
Landlords are growing more optimistic about their lettings businesses, according to a new report; however, challenges in the buy-to-let sector persist, the research firm’s executive warns.
The latest Landlord Trends report from market research company Pegasus Insight highlights that 37% of landlords felt “good” or “very good” about their prospects in Q4 2024, compared to 33% in the same quarter the previous year. Since mid-2023, confidence among landlords has been gradually increasing.
Those generating “large profits” were the most confident, with 71% expressing optimism. This dropped to 33% for those making “small profits” and just 8% for those breaking even or incurring losses.
On a quarterly basis, slight improvements were noted. Optimism about business prospects rose from 32% in Q3 2024 to 37% in Q4, positivity around Capital Gains Tax (CGT) increased from 14% to 17%, and confidence in rental yields edged up from 36% to 38%.
Still, concerns about the Renters’ Rights Bill persist. Three-quarters of landlords believe the bill will negatively impact their businesses, with 43% anticipating significant harm. On a broader scale, 65% think the bill will have serious repercussions for the private rental sector.
Amid these challenges, 73% of landlords raised rents in 2024, with 62% planning further increases in 2025. Nevertheless, over 80% are letting at least one property below market rates. On average, these landlords estimate they are subsidising 4.7 properties by £144 each per month. Larger landlords report subsidising 12.8 properties at an average monthly loss of £120 per property.
“Improving landlord confidence is testament to the resilience of the buy-to-let sector and the strength of the fundamental economics underpinning this market, fundamentals which the Renters’ Rights Bill will only serve to reinforce,” commented Bethan Cooke, director at Pegasus Insight.
“If this new bill forces more landlords to exit the market, it will further deepen the supply-demand imbalance which pushed average rents to unprecedented levels last year. What’s more, as the legislative threat builds, so does the pressure for landlords to pre-emptively increase rents to future-proof their businesses.”
Cooke stressed that while landlords charging below-market rates may currently compromise on revenue to retain good tenants, they might not feel able to continue doing so in a more restrictive environment.
“The long-term profitability trend for the buy-to-let market is stable, and prospects for the sector remain very good,” she said. “So, while the Renter’s Rights Bill may make life more difficult for landlords, the unintended consequences are likely to be much harder on tenants themselves.”
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