Elsewhere, although house prices are expected to fall by another 1 per cent by the end of next year, BTL landlords are more optimistic, with 32 per cent foreseeing a rise in house prices in the next 12 months.
As a result, the majority of landlords are positive about the future performance – in terms of both capital growth and rental returns – of their investments, which is perhaps why a quarter of landlords aim to expand their BTL portfolio in the next 12 months.
This should give the market a significant boost. Indeed, the fact that 66 per cent of investors plan on maintaining and only 7 per cent plan on reducing the size of their portfolios demonstrates the confidence that landlords have in their investments as the investment landscape continues to stabilise.
Supporting this, recent forecasts from Chestertons show rental prices could rise by 5 per cent in 2024. Alongside further expected reductions in mortgage rates (and therefore repayments), this should translate into strong and improving rental yields next year.
Despite this encouraging outlook, some uncertainties do linger in the BTL sector.
With the next general election approaching, for example, 51 per cent of landlords told us they would delay any long-term investment decisions until the outcome has been decided.
Meanwhile, a majority (62 per cent) would like more consistency and clarity regarding government policies that affect landlords.
This is likely due to the unsettled landscape of BTL regulations in 2023, such as the decision to postpone the incoming changes to EPC regulations.
Supporting landlords
It is promising that a number of landlords maintain a positive outlook despite the challenges that the BTL market has faced in the past couple of years.
As the market rebounds and economic circumstances improve, however, it is crucial that landlords continue to be provided with the necessary support in order to manage their portfolios effectively and confidently next year.
Importantly, landlords will require flexibility, certainty, and excellent customer service from their brokers, so intermediaries must be able to leverage their expertise to secure financial products that best match their client’s needs in the months ahead.
Meanwhile, with many challenges still confronting investors and their portfolios, effective communication by lenders and brokers about how the economic environment is affecting – and could affect – a borrower's loan or mortgage will be of the utmost value in 2024.
To conclude, while landlords appear to be optimistic about their property investments, the future of the BTL sector remains the subject of significant speculation.
It is imperative, therefore, that lenders and brokers remain steadfast in supporting their clients’ investment plans as attention turns to the new year.
