BM Solutions’ latest quarterly index has revealed that landlord confidence ended 2017 low but relatively stable, despite one in five landlords seeing a drop in tenant demand.
The research found that tenant demand had dipped to the lowest level in five years. The proportion of landlords looking to expand in the next year was also at an all-time low of 12%.
The quarterly BM Solutions / BDRC Continental Landlords Panel found that while confidence across all key indicators had fallen year on year, the second half of 2017 saw little change.
Prospects for landlords’ own letting business saw the biggest drop over the year, down 6%. In Q4 this reached the near record low of Q2, and was down 3% to 38%.
Confidence in the UK’s financial markets and private rental sector recorded slight uplifts in Q4, however landlords were feeling less optimistic about the near term prospects for rental yield and capital gains – both down by 2% to 47% and 30% respectively.
Landlord Confidence Indicators
| Confidence in near term prospects for | Q4 2016 | Q3 2017 | Q4 2017 | Quarterly % Change | Annual % change |
| UK’s financial markets | 20% | 16% | 17% | 1% | -3% |
| Capital gains | 34% | 32% | 30% | -2% | -4% |
| Rental yields | 51% | 49% | 47% | -2% | -4% |
| Own letting business | 44% | 41% | 38% | -3% | -6% |
| Private rental sector | 25% | 20% | 21% | 1% | -4% |
Source: BDRC Continental
Perceptions of tenant demand varied significantly across the country with landlords in Scotland reporting the strongest increase in tenant demand (37%), followed by East Midlands (33%) and the South West (32%).
Landlords in four regions – London (outer), London (central), North East and South East –reported negative net tenant demand (e.g. more landlords were reporting tenant demand declining than increasing).
The average rental yield in Q4 remained relatively stable at 5.9%. Landlords in the North West generated the highest rental yield of 6.7%, followed by South West (6.2%),
East Midlands and North East (both 6.1%). Those in London (outer) achieved the lowest yield of 5.0%.
Phil Rickards, head of BM Solutions, said: “At the end of 2017 landlords were less confident than in the previous year, especially in terms of their own letting business – this is to be expected given the volume of change they’ve experienced.
“We have more recently seen the introduction of new portfolio rules in 2017 which will also have started to impact the proportion of landlords looking to expand their portfolio in the next year, while the market adjusts to further change. Having said all of this, profitability still remains strong, with a healthy 86% of landlords making a profit and the average rental yield remaining stable.”