74% of landlords confident for 2024

The Mortgage Lender (TML) has released data which shows that 74% of surveyed residential buy to let landlords are confident about the performance of the property market, as they look ahead to the next 12 months.

Censuswide, a global research company, gathered responses from 1,001 landlords on behalf of TML, over the period 18th October 2023 – 24th October 2023.

HMO landlords most positive

The greatest degree of confidence was amongst landlords whose properties were mostly Houses of Multiple Occupation (HMOs). The results from this group of respondents showed that 86% were confident in the 12 months ahead.

Landlords with properties of a very similar type – student accommodation, which is essentially a subset of HMOs - were similarly confident at 84%.

Commenting on this outcome, Lee Cologne sales manager at specialist mortgage broker, Commercial Trust said:

It is understandable that this cohort of landlords are particularly confident about the year ahead. Not only do HMOs offer higher yields, giving greater financial security, but this is backed by high demand from tenants.

“HMOs suit young professionals, who cannot afford to buy a home, but want to strike out from being at home with parents. Other tenant groups also find the flexible living and often central locations of these properties work well with their lifestyle.

“Similarly, long established education hubs offer a steady stream of students looking for accommodation.

“The margins offered by HMOs mean that the increase in mortgage rates may not have been as difficult to absorb as for some other borrowers.

“Any requirement to increase rents to cover higher costs can be done in aggregate across all tenants which also means the impact may be less than for individual tenant units renting entire homes.

Landlord attitudes to their own properties

71% of landlords said they felt confident about the performance of their own properties, as they looked towards the next 12 months. Portfolio landlords, defined in the survey as those owning five or more properties, were the most confident at 78%.

The survey also demonstrated that experience counted towards the degree of confidence landlords felt.

Those who had been in the Private Rental Sector (PRS) for five years or more had a greater degree of confidence for the next 12 months, at 73%.

Landlords with less than five years’ experience returned a result of 69% showing confidence.

As with all things, experience can breed confidence. Longer standing landlords may have gone through economic fluctuations and come out of the other side of them all the wiser. Likewise, changes in regulation may be more familiar territory.

Those landlords are more likely to be more used to adapting to change and maintaining a profitable rental business.

A 12 month view of rents

Much has been reported in the industry of rents rising to combat changes in the PRS. Looking back over the twelve months prior, 73% of landlords surveyed said they had increased rents – albeit the data released does not show whether this differs from previous years. Rents were up 34% on average.

The levers bringing about the increase in rents were largely due to landlords passing on an increase in costs. This accounted for 52% of those surveyed. 28% said they increased rents in response to market trends.

There will still be landlords who have not yet come out of initial rate periods of mortgages secured before the rises in interest rates, so this factor may still have influence on future rents.

Reporting of rents by the Office for National Statistics is set to change in March, as it has announced that the sample size will double from 250,000 to 500,000. So, this may muddy the water on drawing a comparison with existing past data in the future.

According to analysts, if this larger sample size had been used in previous years the outcome would have been higher rents than official ONS data actually shows.

This may mean that come March, a higher rise in ONS rental data will be in part driven by this change.

TML respond to the survey findings

Speaking on the results of their survey, Chris Kirby, head of key accounts and specialist distribution at TML said:

Given the pivotal role that the BTL industry plays in supporting the residential market and ensuring the maintenance of the much-needed supply of homes, it’s encouraging to see these levels of confidence. Despite the fact that many landlords are facing higher operating costs, and additional to the inflationary pressures that are impacting everyone, the continued supply of good quality, well maintained rental properties is a must.

“For landlords who are looking to expand their existing portfolio, or remortgage their properties, it’s important to seek broker advice to ensure they are accessing the best possible opportunities in the coming year.

As ever, the team at Commercial Trust are on hand to help all landlords looking at their mortgage requirements. Call, live chat or request a call back from a specialist mortgage advisor.