The buy-to-let sector continues to grow, with tenant demand remaining consistently strong.
However, a new survey has indicated that some landlords are concerned about their short-term prospects.
High demand, low confidence
BM Solutions’ buy to let quarterly index indicates that 41% of landlords reported an increase in tenant demand during the last quarter, but that confidence has fallen dramatically.
Tenant demand was highest in the East of England, with 52% of landlords reporting a rise in tenant demand over the last three months. The largest quarterly increase was recorded in the East Midlands, where demand was up by 12%.
At the lower end of the scale, the South West and North East saw the greatest drop in landlords noting increased demand over the last quarter.
By region, tenant demand altered in the last three months as followed:
| Property location | Tenant demand in Q2 2015 (Net increase) | Tenant demand in Q3 2015 (Net increase) | Quarterly change (% point change) |
| East of England | 48% | 52% | 4% |
| London (Outer) | 40% | 48% | 8% |
| South East | 41% | 47% | 6% |
| East Midlands | 35% | 47% | 12% |
| London Central*** | 35% | 45% | 10% |
| Yorks & Humber | 35% | 39% | 4% |
| West Midlands | 37% | 38% | 1% |
| Wales | 36% | 38% | 2% |
| South West | 45% | 37% | -8% |
| North West | 27% | 34% | 7% |
| Scotland | 30% | 33% | 3% |
| North East | 39% | 31% | -8% |
Outlook
The report revealed that confidence in the UK’s financial market has dipped, with 25% confident about the outlook for the next quarter, as opposed to 37% in quarter two of this year. Landlords also reported a fall in confidence in the private rental sector as a whole, with 34% saying they were positive about the sector, as opposed to 59% in Q2 of 2015.
61% of landlords said that they intend to live off the rental income generated by their portfolio when they eventually retire. A further 36% said they would make a decision based on market trends at the time.
Landlord concern over short-term prospects grows
Void periods recorded also increased during the last quarter, with 35% of landlords experiencing this in Q3, as opposed to 29% in the previous two quarters. In addition, the average rental yield achieved dropped to its lowest level for five years, falling to 5.6%.
By region, landlords in Yorkshire and the Humber and Wales saw the highest rental yield of 6.1%. Those letting in Scotland and Outer London saw the lowest, with 5.1% and 4.8% respectively.
Average rental yields per region were over the last quarter were:
| Property location | % |
| Yorkshire & the Humber | 6.1 |
| Wales | 6.1 |
| North West | 5.9 |
| East Midlands | 5.8 |
| West Midlands | 5.7 |
| North East | 5.6 |
| East of England | 5.6 |
| South West | 5.5 |
| South East (excl. London) | 5.4 |
| London (central) | 5.2 |
| Scotland | 5.1 |
| London (outer) | 4.8 |
Spotlight
Phil Rickards, Head of BM Solutions noted, ‘there has clearly been a spotlight shining on the Buy-to-Let market and Private Rental Sector for most of 2015. Landlord confidence in the outlooks for the private rental sector as a whole and landlord’s own lettings businesses have seen statistically significant declines when benchmarked against Q3 2014.’[1]
‘However, the market is still holding up and at the same time four in 10 landlords report demand has increased in the areas where they hold properties during the last quarter and yields remain strong. There’s no doubting 2016 looks like a challenging year ahead however I take comfort in the fact there’s still a need for a strong private rental sector along with good quality housing to support demand,’ he concluded.[1]
[1] http://www.propertyreporter.co.uk/landlords/landlord-confidence-dr0ps.html