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How robust is the PRS? We evaluate the data
The mortgage market has gone through many changes. Our latest research shows some fascinating results…
The lending curveball on the back of the ‘mini-budget’ and subsequent changes and swap rate volatility certainly sent a few shockwaves through areas of the mortgage market.
With so many variables still in place, and the speed at which high-level decisions are being made which could affect the housing and mortgage market, it’s difficult to look far ahead. However, when it comes to the BTL sector, what we can do is reaffirm its robust nature and highlight the solid foundations that were firmly in place prior to any additional economic pressure.
The latest BVA BDRC Landlord Panel research for Q3 2022 offers some pertinent insight into performance, sentiment and outlying trends across the BTL marketplace.
Rental yield
After a dip in Q1, the average achieved rental yield was reported to have edged up for the second consecutive quarter to 5.8%. Landlords with multi-unit blocks of flats achieved the highest rental yields in Q3, with an average of 6.3%. HMOs also achieved a higher than average yield of 6.2%. Linked to this, students and migrant workers provided the strongest average yields of any tenant types at 6.7%. (slide 25)
Regional rents
On a regional basis, landlords operating in the West Midlands, North East, Yorks & the Humber, the North West and East Midlands attained the highest rental yields in Q3, all generating average yields in excess of 6% for this quarter, higher than landlords in general. Landlords operating in Outer and Central London continued to generate the lowest average yields (circa 5.0%) due to higher property prices. It also remained the case that over 1 in 4 landlords didn’t know their rental yield or were unsure how to calculate it (29%).
Tenant demand
Turning our attention to tenant demand, the proportion of landlords reporting increased tenant demand rose in Q3, with 65% of landlords reporting an uptick while only 1% said they had seen tenant demand decrease to any extent. Larger portfolio landlords (11+ properties) continued to be much more optimistic, with 79% reporting increasing demand.
Regionally, landlords operating in the South West of England reported an increase in tenant demand, with 88% saying it had risen over the last three months (vs. 82% in Q2 ‘22). Yorkshire & The Humber became the region with the lowest proportion of landlords seeing increasing demand (74%)
Specialist lenders will play a key role in helping intermediaries and landlords to access the kind of solutions they need now, and in the future.
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