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Optimism on the up – why the current market looks good for landlords

In recent years, landlords would be forgiven for thinking they have been deliberately targeted by the government, with a swathe of new regulation, legislation and tax disincentives over the last five or six years.

Despite this, investing in property has remained a very popular way to make money or add to that pension pot, with bricks and mortar proving to be the safest and stable asset class for a number of years now, even in light of Brexit, political uncertainty and most recently the Covid-19 pandemic.

So perhaps it’s no surprise to see that landlord optimism is back on the up having sunk to record lows during the worst days of the pandemic.

A recent survey carried out on behalf of lender Paragon Bank, found that landlord sentiment is now bouncing back in a big way.

Here, we explore what the research revealed and why the market currently looks very promising for landlords as we get ready to enter 2022.

What did we find out?

The research found that the proportion of landlords feeling optimistic about different facets of letting is currently at its highest level for five years.

As part of the survey of more than 600 landlords, conducted by BVA BDRC, landlords were asked to rate their forecasts for rental yields, their own lettings business, capital gains, the private rented sector in general, and the UK financial market.

Those who judged the outlook for these measures to be either ‘good’ or ‘very good’ outdid levels last seen in the third quarter of 2016 - the survey which was carried out just before the EU referendum. Landlord optimism has been steadily growing following the record low levels seen in the first quarter of 2020, when the coronavirus crisis first arrived in Britain and has now hit its highest peak since 2016.

The research also noted a clear correlation between optimism and the size of a landlord’s portfolio. Landlords managing bigger portfolios tend to be more positive about the future for their own lettings business, with comfortably over half (56%) of those with eleven or more properties feeling ‘good’ or ‘very good’ about the future, dropping to below half (46%) amongst those with between one and 10 properties.

What’s more, the survey recorded a link between confidence and property purchase behaviour, with a positive outlook seen among nearly two-thirds of those who have recently acquired a property. This is in comparison to just under half of all respondents.

Further to this, more than three-quarters of landlords who aim to increase their lettings business in the next year are optimistic. Confidence, however, dwindles among those looking to divest, with 26% feeling optimistic.

Paragon’s managing director for mortgages, Richard Rowntree, said landlord confidence understandably took a knock in the first quarter of 2020, as the extent of the pandemic became apparent, but has bounced back since.

“It is fantastic to see optimism bounce back and rise in the time since; it is an indication of the strength of the sector. Landlords see the sector’s issues and opportunities on a daily basis so measuring their outlook can provide useful insight for the industry and, as we see here, investor confidence can have a real impact on behaviour,” he added.

No Budget surprises for landlords

The above research follows on from the Autumn Budget, where it was speculated that landlords would face new changes to property taxation. As it turned out, though, the PRS was almost entirely left alone as the Chancellor placed his priorities elsewhere.

There was a small but significant change to Capital Gains Tax (CGT) announced in the Budget small print, but this will likely be seen as a positive for landlords looking to sell as it gives them more time to file their CGT tax form – the time for his doubled from 30 days to 60 days, effective from midnight on the day of the Budget.

Other than that, there were no nasty surprises for landlords after years of big announcements in recent Budgets and fiscal events.

Many in the lettings sector will be breathing a sigh of relief at that, but others will be frustrated that potential plans to simplify and streamline property taxes remain just an idea for now.

Just the day after the Budget, the government also revealed that it would be delaying the rental reform White Paper until 2022. This means any imminent threat of Section 21 being abolished or a mandatory register for landlords is held off for now, but could still be on the cards next year when
the government finally gets round to introducing the Rental Reform Bill.

These factors, and ongoing strong demand and growth in rental prices, make it a good time to be a landlord as we approach a new year. If you’ve got any properties on your books that are currently unoccupied, or if you’re looking to expand your portfolio, now could be the perfect time to list as tenants typically prefer to be in their new home before Christmas arrives.

If you want expert help with letting your home in the Canary Wharf, Surrey Quays and Rotherhithe areas, our friendly team will be available to assist with any further queries. We are not just focused on east London but cover central London and other parts of London too.

You can also request a free instant valuation online by simply entering your postcode here to find out how much you could be charging in rent each month.