Landlords are losing confidence in their ability to rely on steady rental profits, according to the latest report from the National Landlords Association (NLA).
The data shows that the proportion of landlords who are optimistic about their ability to rely on steady rental profits has dropped by 15% in the past two years – down from 64% in the second quarter (Q2) of 2015 to just under half (49%) in Q2 2017.
This drop in confidence coincides with the period since the announcement from the former chancellor, George Osborne, in July 2015 that mortgage interest tax relief would be removed for landlords.
However, the sentiment contrasts with actual rental profits achieved across the UK, which have remained fairly stable. Over the last few years, the average rental yield has fluctuated around the 6% mark.
Regionally, landlords in the East Midlands currently generate the highest rental yields, at 6.9%. By contrast, landlords in outer London earn the lowest yields, at 5%.
The news arrives during a time when house prices in many parts of the UK are stalling. The average property rose in value by just 0.3% in July, following recent declines in May, April and March.
The CEO of the NLA, Richard Lambert, comments on the study’s findings: “Average rental yields have remained fairly stable over the past few years, yet there is a steady increase in landlords losing confidence in their ability to make a profit from letting property.
“This perception probably exists because many will now be feeling the impact on their businesses of greater taxation and the costs of complying with regulation, which are eating away at their profits and making it harder to provide homes.”
He adds: “Like any business, the increasing value of the capital assets on your balance sheet will be of little help if you are treading the fine line between profit and loss, especially if you can’t keep up your mortgage payments in the short-term”.
Landlords, has your confidence in making solid rental profits dwindled recently?