Landlords’ confidence in the sector is waning

A concerning new report from Kent Reliance has indicated that landlord confidence has slipped as a result of tax increases and slower house price growth.

According to the data, now only 41% have a positive outlook for their property portfolios. This is a fall from 44% in the previous quarter and a big drop from the 67% seen three years ago, suggesting that political and economic uncertainty is adding to landlords’ concerns.


The value of the buy-to-let sector has increased by £68bn during the last year, to hit a record of £1.3trn. However, the yearly increase of 5.5% is half the level seen one year previously.

Decreased confidence amongst landlords backs up the slower growth in value of the private rental sector. The slowdown in price inflation has been a key factor, with the average annual average increase slowing to 3.2% during the last twelve months. In both of the last 2 quarters, prices fell.

There are now an estimated 5.5m households in the buy-to-let sector but annual growth of 2.3% is now just one third of the level recorded three years ago. Tenant demand is still rising, albeit at a slower pace.

27% of landlords saw an increase in tenant demand during the last quarter. In terms of supply, there was a notable change. During the opening three months of 2017, the number of landlords looking to expand their portfolios was only slightly more than those looking to reduce. 19% of landlords are now looking to reduce their portfolios in comparison to 13% wanting to increase.

Tax Changes

Property investors are seemingly taking actions to mitigate the impact of Government intervention through upping rents and incorporating their business.

Kent Reliance’s data indicates that six in ten applications for buy-to-let mortgages during 2016 were via limited companies. However, demand for limited company lending has not reached the heights seen during the last year, with around four in ten loans so far during 2017.

Landlords' confidence in the sector is waning

Landlords’ confidence in the sector is waning

Landlords are also looking to increase their rents to cover their greater outgoings. Typical rents per property now stand at £889 across Britain – a rise of 1.9% annually. This is likely to continue during the next 6 months, as the alterations to mortgage interest tax relief continue to take hold.

As a result of rising rents and falling house prices, yields have moved up slightly to 4.5% Throughout the private rental sector, growth in the number of households and monthly rents mean that landlords are seeing a rise of 4.9bn per month.

Perfect Storm

Andy Golding, Chief Executive of OneSavingsBank, noted: ‘A perfect storm of weakening house prices, higher taxes and lending restrictions have knocked investors’ confidence. On top of this, investors are now being buffeted by the winds of political uncertainty following the election, and its impact on the economy.’

‘Uncertainty will pass, but the impact of changes to mortgage tax relief and underwriting standards will leave a more indelible mark on the sector. We believe these changes will alter the mix of landlords, creating a more professional and stable sector in the long-term. There are already some signs of consolidation, with highly geared amateur landlords most likely to leave, and we are also seeing investors take action to protect their margins.’[1]

Concluding, Mr Golding observed: ‘The fundamentals supporting the PRS have not drastically changed. Yes, first-time buyer numbers have been recovering, but there is still an underlying supply and demand gap across the country. Given the inability of any party to win a clear majority in the election, the implementation of a strategy to create a necessary housing boom seems unlikely. Affordability issues will therefore remain, and rental accommodation will retain its importance to those unable to take their first step onto the property ladder.’[1]



©2020 Just Landlords