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The resolute nature of the BTL market
Given the significant economic upheaval witnessed in recent times, many landlords throughout the UK have undertaken a thorough review of their financial standing, the efficacy of their property portfolios, and, in certain instances, reconsidered their short-term, medium-term, and long-term buy to let objectives.
Unquestionably, this has resulted in some landlords opting to divest their holdings and completely withdraw from the market. However, it is worth noting that this tendency has predominantly been observed among landlords with relatively small portfolios, rather than those at the more experienced and professional end of the landlord spectrum. In fact, based on conversations with our intermediary partners who cater to larger portfolio clients, it is evident that confidence remains largely unshaken within this segment of landlords. This steadfastness underscores the remarkable resilience of the buy to let market.
A primary contributor to this enduring confidence is the continued availability of competitive alternatives for landlords who are capitalising on the tax-efficient framework of operating through a limited company structure. In fact, as per the Q2 2023 Landlord Panel research conducted by BVA BDRC in collaboration with Foundation Home Loans, an overwhelming 74% of respondents now express their intention to acquire their next property within a limited company framework. This figure signifies a noteworthy increase (+12% compared to Q1) and marks a new high.
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The report further delineated that merely 17% intend to make purchases as individuals, reflecting a decline of 7% compared to the previous quarter and a substantial drop of 12% in comparison to Q4 2022. Notably, landlords with more extensive portfolios exhibit a significantly higher likelihood of opting for a limited company structure (63% among those with 6 or more properties, as opposed to 37% among those with 1 to 5 properties).
The robustness of tenant demand is another pivotal factor contributing to the optimistic outlook of portfolio landlords and is also leading to a larger percentage of landlords noting rental increases in the second quarter of 2023, as 85% of survey respondents reported experiencing higher rental rates in their respective property markets. Furthermore, approximately half of the landlords are considering raising rents in the upcoming six months, with their intentions remaining consistent. However, it's noteworthy that landlords with single properties exhibit greater reluctance to implement rental hikes, with only 29% indicating such intentions. Among those planning increases, the average proposed increment is 8.4%.
These enlightening findings emphasise the critical role that landlords, Buy-to-Let (BTL) lenders, and advisers are playing for a growing demographic of individuals, couples, and families across the United Kingdom. This population increasingly relies on high-quality rental housing to fulfil their housing requirements.
References:
https://news.sky.com/story/why-renters-are-more-vulnerable-to
-interest-rate-rises-than-mortgage-holders-12929332
This article was originally published on the Intermediary Magazine
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