The latest quarterly index from BM Solutions/BDRC Continental Landlords Panel has found that while all key confidence indicators remain at historically low levels, particular around the broader Private Rental Sector, landlord optimism edged upwards in in the third quarter of 2017.
Landlords’ confidence in their own letting business has seen the biggest improvement, up 5% to 41% from an all-time low position in Q2, followed by prospects for UK’s financial markets (+4%). The wider private rental sector has seen the biggest year-on-year fall, down 17% from Q3 2016, but did recover slightly from the Q2 2017 position.
Landlord Confidence Indicators:
| Confidence in near term prospects for | Q3 2016 | Q2 2017 | Q3 2017 | Quarterly % Change | Annual % change |
| UK’s financial markets | 29% | 12% | 16% | +4% | -13% |
| Capital gains | 41% | 29% | 32% | +3% | -9% |
| Rental yields | 59% | 49% | 49% | 0% | -10% |
| Own letting business | 54% | 36% | 41% | +5% | -13% |
| UK’s private rental sector | 37% | 19% | 20% | +1% | -17% |
Source: BDRC Continental
Tenant demand softened again during Q3, with only 22% of landlords reporting an increase in demand – the lowest recorded in the last five years. Landlords in East Midlands report the strongest net increase in tenant demand (40%) followed by Yorkshire and the Humber (39%). London and the South East are the only regions where net tenant demand is negative (e.g. more landlords are reporting tenant demand is declining, than are saying that it is increasing).
The average rental yield in Q3 remains relatively stable at 5.8%. Landlords operating in the East Midlands currently generate the highest rental yield of 6.7%, followed by North West (6.4%) and North East (6.1%). Those in London (central) achieve the lowest yield (5.1%).
A record proportion of landlords (20%) plan to reduce the number of properties in their portfolio in the next year. Most of this projected activity will be among landlords with 11 or more properties.
Phil Rickards, head of BM Solutions, said: “The latest report shows that landlords are starting to feel more optimistic following a period of declining confidence during the past 12 months. Key measures, especially for their own business have improved from the last quarter, with profitability remaining high. More than eight in 10 (84%) landlords are making a profit from their lettings business.”