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Buy-to-let landlords feeling confident about property market

Estate agent signs advertising homes for rent

The UK rental market has an imbalance between supply and demand, with fewer properties available than there are people seeking homes.

Figures from Rightmove show that in 2023 there were an average of 20 individual enquiries per available rental property, compared to an average of six in 2019.

While there has been a gradual easing from the peak levels seen in recent years, estate agency Fine & Country reports that tenant demand remains around a third higher than the five-year average. Continued competition in the market is expected to support rental growth in 2024.

Confident outlook

With demand still very high, a new study shows that property owners are optimistic about the rental market in the coming year.

A survey of 1,000 buy-to-let residential landlords by The Mortgage Lender (TML) found that 74% feel confident about the performance of the property market over the next 12 months, with 27% feeling very confident.

"Given the pivotal role that the buy-to-let 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," said Chris Kirby, head of Key Accounts & Specialist Distribution at TML.

Confidence was highest among landlords that predominantly own homes of multiple occupancy (HMOs) at 86%, followed by those who offer student accommodation (84%) and portfolio landlords with more than five properties (82%).

Landlords also took a positive view about the performance of their own rental properties over the next 12 months, with 71% feeling confident.

Those who have been renting out properties for over five years were more likely to feel confident, likely due to their experience in navigating a number of economic ups and downs.

'Vital role'

These findings are in line with an earlier survey by Paragon Bank among almost 800 landlords which found that all aspects of landlord confidence had improved year-on-year, driven by more stable market and economic conditions.

"Landlords play a vital role in the UK's housing provision, so it is important that they feel confident in the investment environment, particularly at a time when demand continues to outstrip supply," said Richard Rowntree, managing director of mortgages at Paragon Bank.

Rental prices up by a third

The ongoing shortage of supply has led to rental prices increasing by a third over the last three years, according to the latest Rental Market Report from Zoopla.

However, rental growth has now peaked as the cost of new lets has reached the ceiling of what renters are able to afford. This year is expected to bring a "major slowdown", with rents forecast to rise just 5% as the market starts to cool.

In the survey by The Mortgage Lender, almost three quarters (73%) of landlords reported that they have increased their rental prices over the last 12 months, with the average rent going up by 34%.

Of these, 28% were following the lead of other properties in the area where asking rents had increased, but 52% said they had raised rents to keep up with the increase in their own costs.

"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," said Chris Kirby from TML.

Kirby added that, for landlords who are looking to expand their existing portfolio, or remortgage their properties, it's important to seek specialist advice to ensure they are accessing the best possible opportunities.

Posted by Fidelius on January 15th 2024

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