NLA member research: a thought-provoking year for landlords
Article Posted - 11th October 2019
It has been a trying year for landlords. With the Government's continued onslaught on private landlords and the uncertainty of Brexit, landlords are experiencing increasingly unchartered waters. The NLA's most recent research, based on interviews with members around the UK, bears this out.
Tenant demand featured heavily in the second-quarter member survey. Based on 738 online interviews with NLA members in June, the research found that the proportion of landlords who believed that there was ‘no change' in tenant demand was now at its lowest level of 32 percent. Twenty-two percent of members said it had increased, while 21 percent said it had decreased, and a further 23 percent were unsure. The result is a substantially mixed picture.
The main reason why landlords thought tenant demand was decreasing was placed wholly on the shoulders of Brexit. Economic uncertainty and more rental properties on the market were given as secondary and tertiary reasons for the fall in tenant demand.
When looking at tenant demand by region, the picture showed a reversal of a decades-long trend of dominant growth in London and the South East of England. In contrast, the Midlands, Wales and the South West were all showing strong growth.
For those members thinking about their plans for retirement, concerns around existing pension provision were the strongest driver of property investment. Members said their rental portfolio would play a key role in their pension provision. One in three members plan to live off their rental income during retirement, while a further third plans to sell property and live off the rental income.
In light of the Tenant Fees Act taking effect last June, most members told us that they plan to take some form of action as a result of the letting agent changes. Almost a quarter of you said you would renegotiate commissions and fees with your letting agent.
With the ongoing concern over a potential ban on Section 21, members told us that they would leave the PRS if the Government were to abolish the no-fault eviction route for landlords. A significant 45 percent of you said you would exit the PRS if Section 21 evictions were banned, while 40 percent of you said you would be less likely to invest in rental property.
For the first time since we began tracking profitability in 2007, we recorded three successive declines in profitability. That said, net profitability remains high overall (81 percent).
Rental yields down
Average yields fell from 5.8 percent to 5.5 percent in the second quarter of this year. This is another first – it's the lowest rate we've recorded since 2010. On a brighter note, landlords managing HMOs earn the highest average yield (6.3 percent) and student landlords also gained the strongest yields.
Landlord confidence down
Optimism among landlords was also on the decline in the second-quarter study, with the outlook for business now at a historic low. We found that each of the five confidence indices are now at their lowest levels in seven years. Landlord confidence in their own lettings business, historically the strongest indicator, has been hardest hit since this time last year, and is now at a historically low position (29 percent optimistic).
It is difficult in these unfamiliar times to be the bearer of negative news, but we are ever hopeful that the tide will turn. The new Government under Boris Johnson has given no indication that it will pick up and run with the policy proposals set out under Theresa May's Government, such as the abolition of Section 21. That said, Brexit uncertainty continues to cause confusion. Until that is resolved, it is difficult to know when these mists will clear.
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