Charting the rise in tenant demand, confidence and potential portfolio additions

According to the Q3 2023 Landlord Panel research from BVA BDRC – in conjunction with Foundation Home Loans – perceived tenant demand has continued to grow. Indeed, in this quarter’s results, we saw a new landlord high of 71% reporting increased tenant demand, with only a very small majority (4%) saying they have seen demand decreasing. Regionally, landlords in the West Midlands were suggested to have experienced the strongest increases in tenant demand.

Landlord confidence is also back on the rise, following a sharp downturn in Q2 2023. The Q3 research outlined that most metrics, with the exception of the UK financial market, have seen significant uplifts since the previous quarter. Confidence in rental yields has seen the most substantial improvement (+16% vs. Q2’23). 

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Confidence levels also look more positive when compared to the same period last year. All metrics bar one (capital gains) are reported to have improved since Q3 2022, with improvements being most notable for confidence in rental yields and one’s own letting business, which have seen statistically significant uplifts vs. last year. Q3 2023 also generated a positive score for NET optimism in ‘own lettings businesses for this first time in a year. 

This landlord optimism, particularly in the rental yield they can secure and the future of their letting businesses, appears to be feeding into views on whether they stay invested or not.

Over the past few quarters we’ve seen significant numbers of landlords saying they intend to sell some, or all, of their portfolio in the next 12 months. However, in Q3, we saw these numbers fall, from an all-time high of 37% last quarter to a current level of 28%. 

Of course, that is still a fairly large number to be even contemplating the sale of property assets, but by the opposite token, there appears to be a growing number looking to add to portfolios, particularly in the form of professional landlords who may already own a large number of properties. 18% of landlords who own 20-plus properties said they intended to increase the size of their portfolios over the next 12 months.

This data represents some much needed encouragement for the BTL sector. Landlords are undoubtedly aware of the opportunities which continue to emerge and many specialist lenders - such as Foundation Home Loans – maintain a strong appetite to lend in this space, with advisers front and centre when it comes to providing the support and resources their clients need.

Looking forward, it’s prudent to remain somewhat cautious, but the outlook for the buy-to-let sector appears to be brighter than it has for some time.

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