Landlord confidence plummets over 15 years despite resilient profits
Pegasus Insight’s 15-year comparison reveals an ageing landlord population and changing borrowing needs, with implications for lenders’ products and risk appetite
Landlords are experiencing a crisis of confidence despite resilient financial performance, with research presented today by Pegasus Insight revealing a striking contrast between profitability and sentiment over the past 15 years.
Just 23% of landlords are confident about the prospects for their own letting business, compared with 63% in 2011. Yet 85% report making a profit, up from 82%, while the proportion experiencing rental arrears has fallen from 50% to 28%. Average rental yields have remained relatively steady at 6.4%, compared with 6.7% in 2011.
The findings also reveal a changing landlord demographic, with implications for lenders’ product design and risk appetite. The average landlord is now 63, compared with 56 in 2011, while average portfolio size has fallen from 11.8 properties to eight. The average number of buy-to-let mortgages has declined from 8.8 to 5.9, while the proportion of landlords owning their entire portfolios outright has risen from 25% to 43%.
Alongside these changes, landlords’ relationship with the sector has deteriorated markedly. Only 25% feel positive about being a landlord, down from 77% in 2011, while just 2% believe landlords are respected, compared with 7% previously.
Almost nine in ten (89%) say being a landlord has become harder in recent years, up from 66% in 2011. Meanwhile, the proportion saying it allows them to earn a living has fallen from 62% to 48%, highlighting the distinction between reporting a profit and feeling that letting property provides a worthwhile livelihood.
The findings were presented by Pegasus Insight directors Bethan Cooke and Mark Long at the firm’s Landlord Trends Workshop at Rightmove’s central London offices. Featuring a speech from the NRLA’s Chris Norris, the event brought together buy-to-let lenders subscribing to Pegasus Insight’s Landlord Trends research and other industry representatives to explore how 15 years of findings can inform lending strategies, product development and understanding of landlords’ changing needs.
The presentation drew on comparable findings stretching back to 2011, covering landlords’ financial performance, confidence, investment intentions and borrowing behaviour. Long and Cooke began researching the sector 20 years ago while working at BVC-BDRC and have continued that work since establishing Pegasus Insight in February 2023.
Limited company ownership has also become more widespread. Almost a quarter of landlords (24%) hold at least one property in a limited company, up from 17% in Q3 2020. Among landlords with incorporated properties, the average number held in a company has risen from 7.6 to 12.7, representing 75% of their portfolios compared with 57% six years ago.
Bethan Cooke, director of Pegasus Insight, said: “The gap between performance and confidence becomes more understandable when you consider the cumulative effect of government policy. Successive Conservative and Labour governments have left landlords feeling that their contribution is undervalued and wondering where the next additional cost or obligation will come from.
“George Osborne’s announcement in 2015 restricting mortgage interest tax relief marked a turning point. Since then, repeated changes to taxation and regulation have reinforced the feeling that the pressure only moves in one direction, with last week’s Budget adding to those concerns.
“A landlord can run a profitable business and still decide that further investment is no longer worth the uncertainty or effort. That is the risk these findings expose. With housing already in short supply, we need an environment in which responsible landlords feel confident about continuing to provide homes.”
Mark Long, managing director of Pegasus Insight, added: “Landlords have demonstrated considerable resilience, adapting their businesses through years of change. Their fears about the future can obscure the commercial reasons for remaining in the market, particularly the continuing demand for the homes they provide.
“The changing landlord demographic raises important questions for lenders. They need to understand landlords’ longer-term plans, whether they are borrowing to invest, refinancing an established portfolio or preparing to reduce their involvement in the sector. Those different needs have implications for mortgage terms, age criteria and product flexibility.
“Alongside this, we expect professionalisation to continue, with experienced portfolio landlords playing an increasingly important role. Lenders will need to consider how their product design, underwriting and risk appetite accommodate both an ageing landlord population and the more complex requirements of professional businesses.
“Brokers can help landlords put their concerns into perspective, assess their options against their own circumstances and find suitable solutions. Understanding who is borrowing, why they need finance and what they intend to do next will be essential.
“Tracking these shifts over time helps lenders look beyond the prevailing mood and make decisions based on how landlords are actually behaving. Confidence is fragile, but there is a resilient business sector beneath it.”