Landlords have reported feeling more positive about the outlook of their business and the market, despite upcoming legislation which could impact how they operate, a survey showed.
Research carried out by Pegasus Insight revealed that although the Renters’ Rights Bill was looming, increased capital gains tax (CGT) and higher stamp duty had been introduced for additional property purchases, 37% of landlords felt ‘good’ or ‘very good’ about their lettings business in Q4 last year, up from a third the year before.
The recent Landlord Trends report showed that since the middle of 2023, landlords have become increasingly confident about their business.
This was more prevalent among landlords who reported making a ‘large profit’, with 71% feeling positive about their business compared to 33% who said they made a ‘small profit’.
Just 8% of landlords who are either breaking even or loss-making said they were optimistic about business.
Five ways we’ve improved our Premier service
Sponsored by Halifax Intermediaries
Landlord feelings about market changes
Since the previous quarter, landlords felt more positive about certain changes in the market with optimism about CGT rising from 14% to 17% and positivity around rental yields increasing from 36% to 38%.
However, around three quarters of landlords believe the Renters’ Rights Bill will be bad for their business, with 43% expecting this to have a significant impact. As for the wider private rental sector, a higher proportion of 65% of landlords think this will have a negative effect on the market.
Plans to increase rents
Although 73% of landlords said they already increased rents last year, over 80% said they were renting out at least one property at below market rates and 62% plan to increase rents further.
According to the Pegasus Insight research, landlords who are letting at below market rates believe they are subsiding 4.7 properties on average by around £144 each per month or £677 in total.
Larger landlords were more likely to report this, saying they were subsidising 12.8 properties each by around £120 a month on average, equating to a total monthly loss of £1,536.
Even with landlords having to make up rental shortfalls, the average rental yield in Q4 neared the previous quarter’s 10-year high at 6.4%.
Bethan Cooke, director at Pegasus Insight, said: “Improving landlord confidence is testament to the resilience of the buy-to-let sector and the strength of the fundamental economics underpinning this market, fundamentals which the Renters’ Rights Bill will only serve to reinforce.
“If this new bill forces more landlords to exit the market, it will further deepen the supply/demand imbalance which pushed average rents to unprecedented levels last year.
“What’s more, as the legislative threat builds, so does the pressure for landlords to pre-emptively increase rents to future-proof their businesses.
She added: “Those landlords charging below-market rates may currently be compromising on revenue in order to retain good tenants, but may not feel they have the option of continuing to do so in a more restrictive environment.
“The long-term profitability trend for the buy-to-let market is stable, and prospects for the sector remain very good. So, while the Renter’s Rights Bill may make life more difficult for landlords, the unintended consequences are likely to be much harder on tenants themselves.”
