BM Solutions found that landlords are feeling the impact of government reform, particularly those with larger portfolios, with 55% saying their level of profitability has been affected since changes to the buy-to-let market were announced in 2015.
Larger portfolio and mortgage buy-to-let landlords experienced this the most, with 75% of landlords managing between 11 and 19 properties saying their level of profitability has decreased.
Almost one in four (23%) landlords are also planning to sell at least one property this year, with landlords owning a portfolio of 11-19 properties more than twice as likely to sell. This compares to just one in seven (15%) landlords saying they are looking to increase the size of their portfolio.
Phil Rickards, Head of BM Solutions, said: “This quarter’s Landlord Panel research paints a more cautious picture from the last quarter when landlords did not experience any financial difficulty. The buy-to-let industry has been through many regulatory changes over the past few years, and the effects of this are clearly being felt.
However, the landscape is not entirely bleak. The proportion of landlords making a profit from their lettings activity remains at 88%, equalling the record high seen in quarter three 2018 It is clear that the market is sensitive to the current legislative and macro-economic environment and this has been reflected in the latest findings.”
Tenant demand
Although one in four landlords reported an increase in perceived tenant demand in the last three months, the picture varied across the country.
The East Midlands generated the highest levels of demand, whereas one in three landlords in Central London think that demand is decreasing. The level of void incidence (any length of time when a property isn’t occupied) was the highest recorded over the past five years with variations again across the country.
Landlords in the North of England were most likely to experience void periods this quarter (c. 60%), whilst those in the South East and West Midlands were least likely (c. 35%).
Feedback from landlords suggests that this could be due to reluctance amongst tenants to move due to the high costs involved, legal fees and inertia following the Christmas period.
Rental yields
At 5.6% on average, yields are at their lowest point for three years, and at the joint lowest level recorded in the past eight years. Landlords with HMOs (17% incidence) continue to achieve the highest rental yields, with the margin widening to other forms of property.
