Landlords in the UK are feeling more positive about the private rented sector (PRS), but remain wary of future challenges, a new survey reveals.
According to the quarterly confidence index from the National Residential Landlords Association (NRLA), landlords' confidence rose by 7.9 percentage points in the third quarter of 2023 - one of the biggest jumps since the survey started.
The survey attributes the boost in confidence to several factors, such as the Government's U-turn on requiring EPC ratings of C or higher for rented properties, the drop in interest rates to 5%, and the assurance that Section 21 evictions will not be scrapped until the courts are reformed.
Increase in landlord confidence was seen across all regions
The increase in landlord confidence was seen across all regions, but was especially noticeable in Wales, where landlords had been very pessimistic since the third quarter of 2022.
However, the survey also notes that the short-term improvement in confidence has not yet translated into long-term plans, as landlords' intentions to buy or sell properties remain at low and high levels respectively.
The survey also asked landlords about their views on tax issues, energy efficiency measures and the Government's proposed Property Portal, which would provide a central platform for landlords and tenants to access information and comply with regulations.
'Confidence rose in every region'
The report says: "Confidence rose in every region. This is the first time this has happened since 2021 Qtr 1.
"Increasing confidence is most notable in Wales where confidence has previously been hovering at record lows since 2022 Qtr 3.
"This short-term shift in confidence has yet to translate into longer term planning, with plans to buy and sell still at the lows and highs previously recorded."
The survey also found that Capital Gains Tax (CGT) is a major deterrent for landlords, with 45% saying it influenced their decision to keep properties longer than they originally intended.
Landlords would sell if EPC minimum ratings are revived
On energy efficiency, more than half of the landlords who had properties with EPC ratings of D or lower said they would either sell some properties or exit the market completely if the Government revived its plans to impose a minimum EPC rating of C.
The survey also revealed that landlords strongly support financial incentives for improving energy efficiency, with 85% saying this is essential for raising standards.
On the Property Portal, landlords were divided, with some welcoming it as a useful source of guidance and compliance, and others doubting its effectiveness and preferring to communicate with tenants directly.
Landlords intend to sell some or all of their properties
The report also highlights that 42% of landlords intend to sell some or all of their properties in the next 12 months, up by 1% from the previous quarter.
The main reasons for selling are the potential impact of the Renters (Reform) Bill, the change in interest rates, and the tax changes.
Only 10% of landlords plan to buy more properties in the next 12 months.
The report also shows that 68% of landlords have increased rents in the last year, and 75% plan to do so in the next 12 months, pointing to rising costs, inflation and interest rate changes as the main drivers.
The report also indicates that tenant demand is at record levels, with 62% of landlords reporting more enquiries than usual.
'Good news that landlord confidence is improving'
The managing director of Accommodation for Students, Simon Thompson, said: "It's good news that landlord confidence is improving and there are various reasons why that should be happening.
"There are issues that need to be resolved from the abolition of Section 21 under the Renters (Reform) Bill and the potential for new EPC laws being brought in."
He added: "It's obvious too that there are issues with taxation and news that landlords are holding onto rented property for longer because of the CGT rules should not be a surprise.
"There's a lot to take away from the report but seeing strong support for the PRS is good, though I worry the prospects of increasing rents in the face of rising costs and interest rates."
