Confidence among landlords improved over the course of the last quarter, new research has indicated, with many anticipating continued increases in rental yield, and a stronger performance from their own letting businesses.

According to findings published by BVA BDRC, landlords are also anticipating capital gains across their portfolios, and a better private rental sector (PRS) as a whole.

The research, comprised of 785 online interviews with landlords, was undertaken on behalf of specialist lender Foundation Home Loans, between September and October this year.

BVA BDRC’s Landlord Panel research report for Q3 suggested the landlord community is responding positively to an increase in perceived tenant demand, and potentially as a reaction to the Government’s September announcement not to take forward plans to introduce mandatory EPC levels at C and above for all PRS properties.

The findings revealed that 12% of landlords said the Government announcement meant they would be “able to stay in the UK rental market”, although the most cited response was that it would have “no/very little impact” on their lettings businesses.

Director of sales at Foundation Home Loans, Grant Hendry, said: “There are clearly a large number of factors for each individual landlord to take into account when looking at the performance of their own portfolio, and their optimism – or otherwise – for the future. However, it’s clearly good news to see a significant shift in positivity from landlords across a number of aspects, and to see confidence having risen quarter-on-quarter.

“Certainly, overall strong tenant demand is playing a major part here, as perhaps is the belief that mortgage rates may now have topped out, and that the market is finally shifting southwards, with more competitive rates meaning stronger affordability.

“The Government’s announcement on minimum EPC levels not moving up to C and above was perhaps a relief to many, particularly in the short-term, and for a number it may make the difference in terms of them staying invested in the sector.”

After five consecutive increases from Q2 2022, the number of landlords who said they were planning to divest some, or all, of their portfolio in the next 12 months, dropped from 37% in Q2 to 28% in Q3.

While 8% of all landlords said they planned to increase the size of their portfolio over the next year, larger portfolio landlords said they would be more likely to purchase. Another 18% of landlords with over 20 properties said they would be adding to portfolios in the next 12 months.

“The number of landlords saying they plan to divest over the next 12 months has fallen, and this may partly be due to the retraction of the energy efficiency regulations for the PRS, but this should not detract from the need for rental properties to be as energy-efficient as possible, particularly in light of the increased utility bills all households have suffered in recent years,” Hendry added.

“While it is too early to say whether we are seeing the start of a new trend line, there appear to be many more landlords feeling optimistic about their future within the PRS, and if this means landlords can keep much needed housing supply available to tenants, then this can only be viewed as a positive.”

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