Confidence remains low among UK landlords as a result of recent government interventions in the buy to let market but buyers are slowly returning to the market, says a new survey.
Overall, landlords report improved buying intentions, growth in tenant demand and yields and confidence is stable but remains at subdued levels, according to the research by BDRC Continental on behalf of Paragon Mortgages.
Following an increase in the rate of stamp duty payable on buy to let purchases, and with a staged reduction in income tax relief available on rental income due start next year, landlord confidence remained low in the first quarter of 2016.
Asked about expected business in the next three months, just 41% of landlords rated their prospects as being either ‘good’ or ‘very good’. This is down from 65% during the same period last year, prior to the government’s clampdown on buy to let.
Indicating that falling levels of confidence may have stabilised however, the figure is just 2% down on the fourth quarter of 2015.
Reflecting this, the survey also saw landlords’ property purchase intentions edge above selling intentions, reversing the situation seen in the final quarter of 2015 when more landlords were looking to sell property than were looking to buy.
Some 19% of landlords indicated that they intend to purchase a property in the coming year, up from 17% in the fourth quarter of 2015 while 16% of landlords indicated that they intend to sell a property, down from 19% in the previous quarter.
Driving this trend was an increase in tenant demand, with 39% of landlords reporting demand as increasing either slightly or significantly, up from 34% in the fourth quarter of 2015. Reflecting this increase, landlords reporting tenant demand as being stable declined from 40% to 36%.
The research also shows that yields in the first quarter of2016 also grew slightly on the previous quarter, averaging 5.7%.
Despite negativity persisting around business expectations over the short term, rental property as an asset class is still viewed favourably by landlords. Some 38% of landlords polled believe investing in the PRS to be ‘much better’ than other investment options such as stocks and shares.
A further 33% believe investing in the PRS to be a ‘little better’ than other investments and just 10% believe an investment in the PRS is worse than other investments.
‘Increased stamp duty, as well as reduced levels of income tax relief for landlords due to come into force next April, have undoubtedly impacted landlord sentiment. Confidence by some measures is down by around a third when compared to the same period last year. That said, this data does suggest that confidence is stabilising,’ said John Heron, director of mortgages at Paragon.
‘In the previous quarter we saw more landlords respond very negatively to the announcements on stamp duty and tax on rental income with more intending to sell rather than buy property, this trend is now reversed and purchase…