The UK BTL sector is bouncing back after a countrywide virus lockdown, according to a research by BVA BDRC research and BM Solutions Landlord Panel
Landlord confidence has rebounded in the second quarter of the year as rental yields and tenant demand have all increased.
Property investors are also increasingly likely to expand their portfolios as the proportion intending to buy reached a four-year high, with those preparing to sell hitting a three-year low.
While seven in 10 landlords still expect their lettings business to be negatively impacted by the pandemic, this is down from eight in 10 recorded in the first quarter as the coronavirus hit.
The results came from the latest BVA BDRC research and BM Solutions Landlord Panel and show a national buy-to-let sector generally bouncing back from the fears of the lockdown.
London is the only location in the country still showing notable signs of pessimism according to the data.
While current purchasing and sales activity is low, evidence suggests a potential increase in expansion activity.
The proportion of landlords intending to buy in the next 12 months increased by five per cent in Q2 to 17 per cent, the highest level for around four years, while those looking to reduce the number of properties they own fell to a three-year low of 17 per cent.
This may be explained by landlord confidence in rental yields and their own lettings business improving most out of the five key factors measured – both rising by 18 percentage points.
Confidence in near term prospects for rental yields reached 42 per cent in the latest survey which was also up three per cent on the same time last year.
And confidence in their own businesses doubled to 37 per cent, up eight per cent on last year.
This is reflected in the fact that 87 per cent of landlords were generating a profit – the highest level of profitability recorded since the end of 2018.
The average achieved rental yield also increased to 5.8 per cent, up 0.5 per cent from Q1 and to its highest point for over a year. Only London was unchanged with the lowest national yield at five per cent.
In contrast, the North East and West Midlands saw yields rise by a full one percentage point to hit 6.2 per cent and 6.1 per cent respectively, with the South West not far behind rising from five per cent to 5.9 per cent.
Central and outer London were the only areas where tenant demand dropped from Q1, while the South East and North East grew strongly.
These may help illustrate the much-discussed patterns of commuters looking to move away from the capital and increasingly work from home.
Three-quarters of Central London landlords reported a decline in demand, up from 44 per cent in Q1, and 85 per cent of landlords operating in the area expect to be negatively impacted by the pandemic – the highest in the country.
This is impacting future intentions, as the proportion of landlords intending to levy a rental increase in the next six months remains low at 13 per cent, down 11 per cent year-on-year.
In contrast only 60 per cent of landlords in Yorkshire and Humberside feel they are likely to be negatively impacted.
Overall, almost half of landlords have experienced Covid-19 related issues across their portfolio, primarily reduced rental income seen by 40 per cent.
However, more than half expect to absorb any losses from savings while 18 per cent intend to increase rents to re-coup lost income.
BM Solutions head Phil Rickards said: Inevitably the past few months have been unsettling and uncertain for landlords and this is reflected in sentiment and profitability as landlords still expect to be negatively impacted by the pandemic.
He said, the latest survey from BVA BDRC and BM Solutions has highlighted a broader feeling of positivity in terms of outlook from landlords with only one in five anticipating a ‘significant’ negative impact as a result of Covid-19.
Despite these challenges, landlords are also seeing their profitability remaining strong with 87 per cent generating a profit – which is the highest level of profitability recorded since the end of 2018 – and a slight uptick in rental yield, he said.
Rickards added that the rise in landlords intending to buy in the next 12 months was also encouraging.
This optimism is an early indicator of the resilience that we have seen in the private rental sector in the past, and the industry continues to work hard behind the scenes to support the market through these challenging times, he added.
This article is for information purposes only.
Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.
There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.