The latest results from BM Solutions’ quarterly landlords panel shows that confidence in the UK financial market in the near-term dropped by 8 per cent on an annual basis in Q4 2018, the lowest level in five years.
In Q4 2017, the confidence indicator was at 17 per cent. In Q4 2018, it dropped to 9 per cent.
Confidence in capital gains also fell 8 per cent on the year, although there was better news when looking at retail yields, where confidence grew 2 per cent and the private rental sector, which went up 1 per cent over the time frame. When asked about their own letting business, there was no movement in landlords’ outlook.
Further data describes a significant amount of change stemming from recent regulatory changes to the buy-to-let market: 55 per cent of landlords asked said that their profitability has been affected, and 75 per cent of landlords with portfolios of between 11 and 19 properties reporting that this had been a negative one.
When asked if they planned to sell at least one property in 2019, 23 per cent answered in the affirmative, with those in the 11 to 19 property bracket being twice as likely to give this answer. Just 15 per cent intend to add to their portfolio.
The trend of regional differences in housing market activity can also be seen in tenant demand. In the East Midlands, there was a quarterly change of 8 per cent in demand, with the South West coming second at six per cent. The East of England saw the biggest fall in demand, dropping 18 per cent, with the South East following, dropping 12 per cent. Meanwhile, Central London recorded a drop in tenant demand of 11 per cent.
In terms of rental yields, the average stood at 5.6 per cent – the lowest in three years. However, landlords with HMOs enjoyed the highest of these.
Yields in outer London, Yorkshire and the Humber, and the North East stood at 6 per cent, with London the worst at 4.7 per cent.
Overall, the proportion of landlords making a profit stood at 88 per cent, the same as in Q3 2018 – a record high.
BM Solutions head Phil Rickards says: “The BTL 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.
“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.”