Jul

Positive signs for growth as landlords’ confidence improves

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According to property investor lending specialists BM solutions, there is increasing evidence that more landlords are looking to expand their portfolios than there are those looking to sell.

While at least 70% of landlords expect their lettings businesses to be hit by the Covid-19 lockdown and the pandemic’s associated problems, this figure is quite a bit less than it was in the first quarter of this year, that’s according to research carried out by BM.

There are definite signs of a national trend of a bounce back from the initial fears the lockdown brought, but with London itself being the only location in the country still showing notable signs of pessimism, that’s according to BM’s data.

The proportion of landlords intending to buy over the next 12 months has jumped from 5% to 17%, that’s the highest level recorded for around four years.

This may be explained by landlord confidence in rental yields and their own lettings business improving, the fact that interest rates for alternative savings investments is almost zero, and there’s the existential threat of a return to inflation after the crisis is over.

Almost 90% over the landlords surveyed by BM reported making a profit, reflecting the highest level of profitability recorded since the end of 2018. Central and outer London were the only areas where tenant demand dropped from Q1, while the South East, North East, Midlands and North West grew strongly.

These trends illustrate the much-reported trend brought about by the need for home-working, leading to an escape from the capital and commuters looking to move to somewhere with outside space, office space and away from the capital.

Three-quarters of Central London landlords have reported reduced tenant demand which represents the biggest demand drop in the country as a result of Covid-19. This will inevitably result in reduced rents, reduced revenue and a negative impact on those London landlords’ future intentions.

Research from Hamptons International backs-up the theme, showing that London-based buy-to-let landlords are increasingly heading to the North West in search of better returns, with around one-third (34%) of London-based investors buying new property in the past year bought in the Midlands and North, up from just 14% in 2015 and 4% in 2010.

The stamp duty surcharge, high London prices, and now the drop in demand is forcing landlords with properties in the capital to look elsewhere. City investors have been looking at property in the North West in the university cities where yields as high as 8 to13% have been achievable. In Liverpool, for example, it is possible for investors to acquire a good quality three-bed, fully let HMO near a university for around £130,000.

Meanwhile, overall the number of prospective tenants has continued to rise, with the average ARLA propertymark branch registering 79 new tenants in June compared to 70 on average in May. Year-on-year, the figure is the highest ever recorded for the month of June, that’s according to the latest Private Rented Sector report by ARLA Propertymark.

The ARLA propertymark figures show that the number of tenants experiencing rent rises increased in June, with 29% of agents witnessing landlords increasing rent compared to just 14% in May, and the average time properties were vacant between tenancies decreased to four weeks in June from five weeks during May.

BM Solutions head Phil Rickards has said:

“Inevitably the past few months have been unsettling and uncertain for landlords and this is reflected in sentiment and profitability as landlords still expect to be negatively impacted by the pandemic.”

Phil Keddie, president at ARLA Propertymark, has said:

“Our latest figures show that the rental market is continuing to pick up following the COVID-19 lockdown. The record-breaking supply of rental stock and demand from tenants for this time of year paints an optimistic picture for the summer months, indicating that the market will be more active than the usual seasonal lull. As the market continues to recover from the pandemic, it’s essential that everyone continues to keep up with their rent in order to sustain the market and help boost the economy during these uncertain times.”

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