The number of landlords looking to expand their portfolio has dropped to an all-time low as demand from tenants continues to shrink.
Just 13 per cent of landlords are planning to add to their portfolio, according to the latest quarterly index from BM Solutions – the smallest proportion since the survey began in 2006.
Tenant demand continued to slow in the first quarter of 2017, with 17 per cent of landlords reporting a decline.
The decrease was driven primarily by central and outer London, where the proportion of landlords reporting falling tenant demand now outnumbers those experiencing growth.
Despite these negative findings, confidence among landlords has now stabilised, with the proportion of landlords feeling optimistic about the UK’s financial markets more than doubling year-on-year and confidence regarding capital gains, the UK private rental sector and rental yields remaining stable.
Despite a dip in confidence in landlords’ own business from last quarter, the levels have now returned to the same as the first quarter of 2016.
Landlords in the South East are most optimistic about the prospects of their own letting business, with 47 per cent feeling ‘good’ or ‘very good’ about its prospects, while those in Scotland and Wales are the least optimistic, with just over a quarter feeling positive (26 per cent).
Just under half (48 per cent) of landlords are seeing rents rise in their area compared to 53 per cent in Q4 2016, while around four in 10 (42 per cent) have increased rents across their own portfolio in the last year (down by 3 per cent from Q4), with 32 per cent intending to do so in the next six months (down 5 per cent from Q4).
The findings are based on data from 754 online interviews with National Landlords Association members and associates conducted between 17 March and 30 March 2017.
Tenant demand in the last three months
| Property location | Tenant demand in Q4 2016 (Net increase) | Tenant demand in Q1 2017 (Net increase) | Quarterly change |
| (% point change) | |||
| East of England | 33% | 48% | 15% |
| South West | 40% | 42% | 2% |
| West Midlands | 27% | 40% | 13% |
| South East | 36% | 37% | 1% |
| East Midlands | 43% | 33% | -10% |
| Wales | 36% | 33% | -3% |
| North West | 35% | 33% | -2% |
| Scotland | 35% | 31% | -4% |
| Yorks & Humber | 36% | 24% | -12% |
| London Central | 21% | 21% | 0% |
| North East | 20% | 20% | 0% |
| London (Outer) | 23% | 19% | -4% |
Phil Rickards, head of BM Solutions, said: “Despite signs of landlord confidence stabilising this quarter, fewer landlords are feeling optimistic about the prospects for their own businesses.
“This has driven down the number of those looking to expand their portfolio further to a new all-time low despite the average portfolio creeping up slightly.
“The impact of the tax changes has a natural link to landlord confidence, as the market landscape continues to be reshaped by changes in regulation.”
Nick Green, broker at Coventry-based Alternative Estates and Financial Services, commented: “In the rental market, we definitely see the demand has dropped.
“People are buying so there are fewer renting, and the rents have gone up quite a lot over the past few years, and that has pushed people into buying.
“Overall, the rental market has overheated a lot, so everyone has put their rents up a bit too high which has slowed down demand, so the rents have had to come down a bit to get tenants.
“People are still wanting buy-to-let properties, but they are a bit more nervous.”
