Positive market sentiment grows

Investor confidence in the private rental sector appears to be returning, after government decisions provide clarity on the market. Portfolio landlords expand their holdings, and a recent landlord sentiment survey shows a positive shift in the industry.

Landlord sentiment changing for the better

In a recent quarterly sentiment survey, conducted by BVA BDRC Landlord Panel for Foundation Home Loans, there is a notable improvement in landlord confidence. The change in landlord sentiment comes as the government chooses to delay the scrapping of Section 21 and re-evaluates mandatory Energy Performance Certificate (EPC) levels.

Following these decisions, 12 percent of surveyed landlords expressed that the EPC U-turn allowed them to remain in the rental market.

Tenant demand has surged, with 71 percent of landlords reporting an increase – a 4 percent rise from the previous quarter, reaching an all-time high.

This heightened demand, coupled with an ongoing shortage of private rental stock, has resulted in a 5 percent increase in the proportion of landlords reporting rising rents in the last year. The rental yield has also seen a slight uptick, reaching 5.3 percent.

Director of sales at Foundation Home Loans, Grant Hendry, commented on the seeming change in landlord sentiment:

There are clearly a large number of factors for each individual landlord to take into account when looking at the performance of their own portfolio, and their optimism – or otherwise – for the future. However, it’s clearly good news to see a significant shift in positivity from landlords across a number of aspects, and to see confidence having risen quarter-on-quarter.

The government’s announcement on minimum EPC levels not moving up to C and above was perhaps a relief too many, particularly in the short-term, and for a number it may make the difference in terms of them staying invested in the sector.

While it is too early to say whether we are seeing the start of a new trend line, there appear to be many more landlords feeling optimistic about their future within the PRS, and if this means landlords can keep much-needed housing supply available to tenants, then this can only be viewed as a positive.

The survey also indicated that larger portfolio landlords, those with 20 or more properties, are particularly optimistic.

Eighteen percent of these landlords plan to expand their portfolios in the coming year. This is in line with a broader trend where 8 percent of all landlords are looking to increase the size of their portfolios.

Larger landlords have expanded their portfolios

More evidence on growing landlord confidence comes from a separate survey by Shawbrook Bank, focusing on portfolio landlords.

Despite market uncertainties, 88 per cent of portfolio landlords have expanded their portfolios in the last six months.

Looking ahead, 25 per cent of these landlords intend to invest in an additional property in the next year, and 22 per cent are considering multiple units.

The Shawbrook survey also highlights diversification trends among portfolio landlords, with 39 per cent exploring different locations and 37 per cent exploring various types of residential property.

Notably, 26 per cent are turning their attention towards student housing, and 21 per cent are eyeing the retirement housing market.

A positive shift

Both the survey on landlord sentiment, by Foundation Home Loans, and the Shawbrook survey on portfolio landlord expansion show a positive shift in landlord in the private rental sector.

This growth in confidence can most likely be attributed to the government’s recent decisions to delay the banning of Section 21 evictions, as well as the scrapping of EPC targets.

Whilst Section 21 evictions are still intended to be stopped, the government’s decision to overhaul the legal process before this is done may also have added to an improvement in outlook felt by landlords.