Landlords’ confidence for their own business showed only 29% of landlords had positive expectations for their letting business over the next three months, down from 44% the same time last year and now at a historic low, according to the latest BVA BDRC1 Landlords Panel surveying over 700 active landlords in Q2 2019.
The panel uses five confidence indices – Capital Gains, Rental Yields, UK Financial Market, UK Private Sector and Own Letting Business - which are now at their lowest levels in 7 years.
Confidence1 in capital gains fell to 23% in the quarter, from 32% in Q2 2018, and prospects for rental yields dropped 10% from 49% in the second quarter of 2018 to 39% in the second quarter 2019, the lowest recorded in over 9 years.
More broadly, confidence in the sector and economy overall declined with 15% optimistic about the UK Private Rented Sector, down from 21% a year ago, and 11% optimistic about the UK Financial market, down from 15% 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 4% 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.
“Whatever a landlord’s future intentions, the increase in regulatory measures and more complicated mortgage applications means specialist lenders will become more vital in easing the increasingly difficult mortgage process. At Aldermore we know clients don’t fit the one-size-fits-all model, that’s why we take a more specialist approach to lending. Our experienced team of manual underwriters assess each application on individual merit and we support landlords throughout the mortgage process to find the right product for them.”
Despite gloomy forecasts, Fundamentals remain strong
While there may be pessimism among landlords, the data also shows the fundamentals of the market remain resilient in the wake of the unprecedented change seen in the past few years. The proportion of landlords making a profit fell by just 1% in Q2 from Q1 2019, and only 4% of landlords say they are making a loss. Being a landlord remains a strong investment with a third of landlords able to make a full-time living off of their lettings, and 53% able to supplement their day job.
Tenant demand has also seen an increase, although regional variations are present, 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 are the only regions where landlords are more likely to report decreases in demand rather than increases, with Central London particularly affected as only 11% with properties there cited an increase in demand. Overall, those perceiving a rise in tenant demand went up from 20% to 23% quarter-on-quarter, with families remaining the most common tenant types.
Shift to professionalisation continues
The data also shows a shift toward professionalisation, with 55% of potential buyers stating an intention to purchase within a Limited Company. While BVA BDRC data shows 26% of landlords intend to sell at least 1 property in the next year, one in seven landlords intend to purchase an additional property in that same time period.