Landlord confidence has fallen sharply over the past 15 years, even though most continue to make a profit from their rental properties, according to new research by Pegasus Insight. Just 23% of landlords now feel confident about the future of their letting business, down from 63% in 2011, while 85% report making a profit, compared with 82% fifteen years ago.
The proportion of landlords experiencing rental arrears has also dropped significantly, from 50% to 28%. Average rental yields remain relatively stable at 6.4%, against 6.7% in 2011.
Confidence gap widens despite stable finances
The findings reveal a widening gap between landlords' financial performance and their confidence in the private rented sector. Only a quarter now feel positive about being a landlord, compared with 77% in 2011. Meanwhile, 89% believe letting property has become harder in recent years, up from 66%.
Just 2% feel landlords command respect, and fewer than half (48%) believe letting property provides them with a living, down from 62%.
Landlords getting older and borrowing less
The research highlights a significant shift in the profile of Britain's landlords. The average landlord is now 63 years old, compared with 56 in 2011. Average portfolio sizes have fallen from 11.8 properties to eight, and the typical number of buy-to-let mortgages has dropped from 8.8 to 5.9.
More landlords are moving away from borrowing altogether. Some 43% now own their entire portfolios outright, compared with just 25% in 2011. At the same time, limited company ownership continues to grow, with almost a quarter (24%) holding at least one property through a limited company, up from 17% in 2020. Among those using company structures, the average number of incorporated properties has increased from 7.6 to 12.7.
Government policies blamed for falling confidence
Bethan Cooke, director of Pegasus Insight, blamed successive government policies for undermining confidence. She said: “The gap between performance and confidence becomes more understandable when you consider the cumulative effect of government policy.
“Successive Conservative and Labour governments have left landlords feeling that their contribution is undervalued and wondering where the next additional cost or obligation will come from.”
Cooke identified the restriction of mortgage interest tax relief, announced by former chancellor George Osborne in 2015, as a turning point. She added: “A landlord can run a profitable business and still decide that further investment is no longer worth the uncertainty or effort. That is the risk these findings expose.”
Buy-to-let lenders face changing market
Mark Long, managing director of Pegasus Insight, said the changing landlord population presents challenges for buy-to-let lenders. He commented: “They need to understand landlords' longer-term plans, whether they are borrowing to invest, refinancing an established portfolio or preparing to reduce their involvement in the sector.”
Long believes lenders must adapt mortgage terms, age criteria and underwriting to reflect the changing market. He added: “Confidence is fragile, but there is a resilient business sector beneath it.”
Pegasus Insight presented the findings at its Landlord Trends Workshop at Rightmove's London offices, bringing together lenders and industry representatives to examine changes in landlord behaviour since 2011.
