Study reveals strong financial returns but declining confidence among landlords
Even as confidence in the sector declines, a recent study commissioned by specialist bank Aldermore has found that landlords across the UK are achieving their best profits and rental yields in years.
The research, conducted by Pegasus Insight, shows that 89% of landlords are making a profit from their rental activities, the highest level recorded since 2019. The average rental yield has also reached 6.6%, marking a 10-year high. Landlords in the North West and Yorkshire & Humber reported the strongest yields, at 7.4% and 7.2% respectively.
Intermediaries continue to play a key role in the market, with 68% of landlords choosing to work with brokers to manage their properties and secure tenants.
Despite these positive financial indicators, landlord sentiment has weakened compared to last year. Expectations for future yields and capital gains have dropped by 3% and 4% respectively. Only 2% of landlords expressed confidence in the UK’s economic outlook, down from 3% at the same point last year.
“The numbers here paint an interesting picture, one that might seem contradictory at first glance,” said Jon Cooper (pictured right), director of mortgages at Aldermore.
“While the average landlord is seemingly doing the best since pre-pandemic days when it comes to profits and yields, what’s increasingly obvious is that many landlords still feel jittery about what the next few years will bring.”
The study also found that 73% of landlords are worried about the impact of the Renters’ Rights Bill on their businesses, and 88% are generally concerned about the new legislation.
The bill, which became law earlier this week, introduces measures such as allowing renters to end tenancies with two months’ notice, enhancing local authority enforcement, and applying the Decent Homes Standard to the private rental sector.
In addition, 92% of landlords expressed concern about the possibility of an 8% national insurance tax on rental income, which some believe could be announced in the Chancellor’s Autumn Budget.
“There’s work to be done to ensure the private rental sector remains a viable environment for both renters and landlords, and regulation must be implemented in a way that is fair, proportionate, and meaningful for all parties,” Cooper said. “We know that many landlords are concerned about unintended consequences of the bill.
“That being said, there may be potential benefits for the countless good landlords operating in the market. Many of the measures could boost trust and satisfaction among tenants, leading to longer tenancies, fewer void periods and fewer rent arrears. Upgrading properties could also mean higher property values.
“Landlords are experts at overcoming regulatory hurdles, and I’m confident they will adapt their strategy, knuckle down and thrive under the new rules.”
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