Quarterly results demonstrate that landlord confidence in their own lettings business remains steady, with rental yields being the only metric among the five to experience a decline. The drop in rental yield confidence is attributed to a perceived decrease in tenant demand, marking the first decline since Q2 2022.
However, this is not indicative of the country as a whole. While London yields are considerably low, more northern regions continue to boast good yield averages. For example, Zoopla shows that the top 10 cities for yields are all located in the North or Scotland.
Within the last three months, 63% of landlords reported an increase in tenant demand, reflecting an 8% decrease from the previous quarter. The decline is mainly driven by more landlords expressing uncertainty, with only a minority (4%) reporting a decline in demand.
Regionally, the North West sees the most significant increases in tenant demand, according to landlords, followed by Yorkshire and the Humber. In contrast, the West Midlands reports a notable decrease, down by 26% quarter-on-quarter.
The research, consisting of 398 online interviews with landlords, was conducted in December on behalf of Foundation Home Loans, an intermediary-only specialist lender.
The latest findings unveil a more cautious landlord community. Landlords with more extensive portfolios are increasingly likely to generate a profitable, full-time income from their properties, and this trend continues to align with the portfolio’s size. They will also be less likely to feel the sting of any void periods if they have more properties to absorb potential losses.
Landlords owning a single property exhibit the least confidence in rental yields and the Private Rented Sector (PRS) overall.
Despite the caution, landlords show a reduced inclination to divest some or all of their properties. Planned divestment is lower than figures reported in H1 of the previous year, while those planning to buy new property have increased by 3%. Notably, landlords with the largest properties remain the most likely to acquire, at 19%.
In response to the government’s decision to postpone mandatory EPC levels of C and above for PRS properties until 2025 – 2028, landlords, on the whole, express satisfaction. 64% of all landlords are content, rising to 80% for those who own 11 or more properties.
However, three out of four landlords still anticipate the eventual introduction of such legislation in the future, with an average expectation of three and a half years for its implementation. For that reason, buy-to-let investors may want to consider buy-to-let properties that reach these EPC levels now – such as new builds – as it will mean they do not need to invest in costly energy efficiency technology further down the line. Why not learn more about how to make money from property with our free guide.
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