Three main camps in the landlord field

This article was supplied by Landbay

We read much about landlords selling up but our research finds they are not leaving the private rented sector in their droves as some parts of the press like to make out.

Our latest survey found that 66% of buy-to-let landlords had no intension of selling any of their property in the next 12 months and 36% of those actually intend to buy more property.

Of the 34% who are thinking of selling, only 10% will sell all of their property and they were mainly small landlords with one to three properties.

As an observation from the results of our survey there are three main camps in the landlord field – landlords who see opportunity ahead and want to build up their portfolios, those who are content with what they have and landlords who are struggling.

Opportunity

Many of our borrowers (37% in the survey) are full time landlords, running a business, while the others work full or part time and some are retired. The survey found that seven out of 10 (70%) intending to buy were portfolio landlords with 44% owning 11 or more properties and 26% have between four and 10 properties.

We have seen a rise in the professionalism of the landlord sector and at Landbay we do specialise in complex lending requirements. However, that doesn’t mean you should rule out the smaller landlords as our survey found 30% of those looking to buy own between one and three properties.

Rental demand has been rising in recent years and the increase in the number of tenants seeking accommodation was a factor for 38% of respondents in wanting to buy more property.

One third of those looking to buy (34%) noted the potential drop in house prices as an opportunity. The stamp duty holiday during the Covid lockdowns, introduced to keep the housing market moving, certainly worked but as with most government intervention it had consequences. The surge in house buying resulted in big house prices hikes, which have been reversing so now prices are slowing down

Some of our respondents commented: “Market conditions are right to get below market value deals at the moment... It is a good time to pick up bargains in a buyers’ market… On-going high rental demand… I need another property for my pension pot.”

The survey also found that 25% of landlords were undecided about buying but some will keep their options open. Comments included: “The right property has to come along… I’m not actively looking but always interested in opportunities.”

Happy medium

In the middle are those landlords who are happy with their portfolios as they are, and at the moment don’t want to buy or sell, especially those who commented that it is part of their pension plan. 

Struggling

For the 34% of buy-to-let landlords thinking of selling, the main deciding factor for 65% of them is the increase in interest rates, and that is up from 45% a year ago. This rise is understandable as when we carried out this survey in October 2022, the Bank of England base rate was 2.25% and it has now climbed to 5.25% and mortgage rates have followed.

Meanwhile, 30% of landlords looking to sell said the rent is not covering their mortgage costs compared to 22% a year ago, and 25% were influenced by the government lowering the threshold for capital gains tax, up from 14% who said that last year. Landlord taxation is a factor for 40% of respondents and the government’s anti-landlord rhetoric was frequently mentioned in their comments.

There is also some concern around difficulties in evicting tenants, noted by 30% of respondents, while 15% mentioned tenant defaults.

Interestingly, potential sellers concerned about the cost of improving the property to meet proposed EPC standards fell to 23%, down from 40% six months ago. This follows on from Prime Minister Rishi Sunak’s announcement in early October to scrap the EPC requirements for all rental property to be at least C rated by 2028.

So, it really is a mixed bag of buyers and sellers in the buy-to-let market and everyone has different circumstances and reasons for pursuing their rental strategies. The next major milestone for the landlord community will be the progress of the Renters Reform Bill through Parliament and that is a whole article, or more, in itself.

Rob Stanton is business development director at Landbay