Balancing Costs and Commitment in the UK Rental Market

While this attention is certainly warranted, we have seen little coverage or emphasis on the struggles of landlords in maintaining a supply of good quality, affordable housing in a private rented sector which accounts for around 20% of households across the country.

This is a sentiment which was echoed in commentary from Kate Davies, executive director of IMLA, when analysing the latest landlord survey. The survey showed that many landlords are small businesses with modest financial turnover and trading profits, facing rapidly rising costs. Landlords will have no choice but to increase rents in order to keep their businesses viable, while debt-free landlords may well do the same in order to make an adequate return, even if that is lower than current returns available elsewhere.

However, the majority of landlords appear committed to remaining in the PRS for the longer term. 53% of mortgaged landlords plan to buy more rental property over the next five years, as do 25% of unmortgaged investors. Only 21% and 17% respectively said they will sell property in that timeframe.

Despite a surge in the number of landlords setting up corporate structures since the removal of tax deductions for interest rates in 2017, only 10% of all rented property is held in limited companies, with 90% still held in personal names and just 3% of the UK PRS is owned by institutional investors.

This proportion of limited company properties is likely to increase as the transition into a more portfolio-centric landlord buy-to-let sector continues. A shift which was evident in further data from the Deposit Protection Service (DPS) which highlighted that double the proportion of landlords with two or fewer properties are planning to sell up and leave the rental market. Almost three times the proportion of landlords with portfolios larger than 10 properties intend to buy more compared with those who own one or two (13.51% compared with 5.63%). 

The buy-to-let sector has had to evolve and reinvent itself on numerous occasions over the years and its resilience has continued to shine through in even the darkest of times. There is plenty of hope and encouragement for the BTL marketplace in 2024 but landlords and their tenants would also welcome all the help they can get along the way.

Resources:

http://www.imla.org.uk/news/post.php?s=2023-12-07-buy-to-let-
landlords-braced-for-80-rise-in-borrowing-costsbut-53-still-planning-longer-term-expansion

https://www.propertyreporter.co.uk/mortgaged-landlords-profits-set-to-plummet-imla.html

*This article was originally published on The Intermediary 

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