Despite facing higher Capital Gains Tax (CGT) and the impending Renters’
Rights Bill, landlords are showing increasing optimism about their business
prospects, research reveals.
It’s only a small year-on-year rise with the findings from Pegasus Insight
revealing that 37% of landlords are feeling positive about their future, up
from the 33% who said so in Q4 2023.
The research firm’s latest Landlord Trends report notes that landlords who
said they made a large profit are the most optimistic, with 71% feeling
positive.
That compares with 33% of those landlords making a small profit and 8% of
those who are breaking even or making a loss.
The quarterly survey also shows slight increases in optimism about
prospects for the PRS, CGT and rental yields.
Landlords believe the RRB will have a negative impact
It’s worth noting that the report warns that 76% of landlords believe the
Renters’ Rights Bill will negatively impact their business,
with 43% expecting significant repercussions.
However, 65% of landlords expect the Bill to deliver a significant negative
impact on the PRS.
A director of the firm, Bethan Cooke, 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.”
She adds: “What’s more, as the legislative threat builds, so does the
pressure for landlords to pre-emptively increase rents to future-proof
their businesses.”
73% of landlords increased rents last year
The research also
highlights that the average rental yield remains near a 10-year high at
6.4% – though 82% of landlords have at least one rental property below its
market rate.
Despite concerns over the Renters’ Rights Bill, 73% of landlords increased
rents in 2024, and 62% plan further increases this year.
Landlords who are letting below market rates say they are subsidising 4.7
properties, on average, by around £144 each per month.
Larger landlords say they subside an average of 12.8 properties by £120 on
each one every month – which, Pegasus says, equates to a monthly loss of
£1,536.
Ms Cooke said: “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 Renters’ Rights Bill may make life more difficult for
landlords, the unintended consequences are likely to be much harder on
tenants themselves.”
Landlord confidence is on the rise
The managing director of Accommodation for Students, Simon Thompson, said:
“For landlords, these findings offer a cautiously optimistic outlook.
“Despite the challenges posed by higher Capital Gains Tax and the upcoming
Renters’ Rights Bill, landlord confidence – however small – is on the rise
with many feeling positive about their business prospects.”
He added: “The resilience of landlords in the face of legislative changes
is commendable.
“While the Renters’ Rights Bill presents significant challenges, it also
underscores the importance of adapting to new market conditions.”
