The end of the amateur landlord? Growth in private rental sector slows despite reaching record values

The ‘cocktail’ of tax reform and regulations for landlords has slowed the private rental sector this year, lender Kent Reliance says.

Its seventh Buy to Let Britain report warns that growth in rents and the number of rental households have both slowed in the year up to the end of the third quarter of 2017.

The value of the PRS has hit a record high of £1.4 trillion, but the number of households rose just 2.2% to 5.6m, compared with an 8% rise in 2014.

Rent rises continued to slow in 2017, hitting £895 at the end of the last quarter, up 1.5% annually. This compared with 2.4% a year ago.

Tenant demand is also growing more slowly too. Just 5% more landlords reported rising tenant demand than those reporting it fall, the lowest balance in at least five years.

The latest report does not make any mention of how landlords would deal with the tenant fee ban, but does say more are incorporating to get round the rollback of mortgage interest relief.

Kent Reliance’s lending data shows that in the first three quarters of 2017, seven in ten buy-to-let applications for house purchase were via limited companies, up from 45% in 2016 as a whole.

The lender found that most activity in the sector is now coming from professional landlords.

A survey of 856 landlords, run in association with BDRC Continental for the report, says investors with more than ten properties made a net addition of one property in the past three months. Among those with less than five properties, net growth was flat.

The report warns that given investors with just a single property comprise 62% of the landlord community, a lack of growth in this segment of the market has a
disproportionate impact.

The poll also found that 41% of landlords are confident about the prospects for their portfolios, while 29% of landlords expect to increase rents over the next six months, ten times the number who expect to reduce them.

Andy Golding, chief executive of OneSavings Bank, which trades under the Kent Reliance and InterBay brands in buy-to-let, said: “Landlords are swallowing another unwelcome cocktail of higher taxation and tighter regulation, and this is undermining the expansion of the private rented sector.

“A fundamental shift in the landlord population is now under way, as buy-to-let moves from being a popular past-time for hundreds of thousands of British amateur landlords, to the preserve of committed long-term investors with experience and expertise. The pace of professionalisation will only increase following the PRA’s latest moves, and incorporation continues apace.

“Creating a more professional sector is no bad thing, but there is a limit to the amount of interference the sector can absorb before we see a severe reduction in supply – an outcome that would see rents shoot up for tenants and reduce their ability to save for a deposit for house purchase.

“Landlords’ confidence is clearly fragile, and as the new tax reforms gradually come into force, any further financial burdens may prove to be a tipping point.”

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3 Comments

  1. ChumpExecutive

    We have seen continued growth in our tenanted managed portfolio week on week, against the established seasonal trend which is that the portfolio peaks out in October, holds or falls marginally in November and December, and surges again in January. Our interpretation is that there is no significant pattern of sell-down by landlords in England & Wales, although there is evidence from the numbers of landlord disinvestment in Scotland.

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  2. Property Peep

    Why is it that these reports seem to suggest that landlords with multiple properties act more professionally than those with only one. In my experience the professional landlords are the least ‘professional’ when looking after their tenants, while those with one or two properties know more about their tenants and care about them more.

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    1. ChumpExecutive

      I’m old enough to remember when the private rented sector consisted of to parts; part one was Policemen, Vicars and Ex-pats on contract in Saudi who let out their homes furnished to get around the Rent Act. They had emotional connection to the property and wanted to “do the right thing” to keep the tenants happy, the property in good repair and (often overlooked) keep the neighbours happy as one day they would return. The other part was “professional” speculative landlords who bought properties which were subject to rent protected tenancies cheap at auction on the “hope value” that the elderly tenant would die soon, and they could sell at open market prices. The recent past has lots of lessons about how the the law of unintended consequences applies when Governments meddle in markets. 

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