Latest Landlord Survey Shows Anomalies to Consider
A friend of mine once told me that perception and reality are two different things. He said that a wise investor always seeks out the reality, rather than rely on perception. Recent landlord news shows just how perception and reality can be polar opposites. Which you choose to follow could determine your future.
Survey Shows Anomalies in Landlord Perceptions and Realities
The latest BVA BDRC survey of buy-to-let landlords has shown just how different the world looks from two sides of the same coin. On the one side, landlords are the least confident they have been for seven years. On the other, the same survey shows that buy-to-let fundamentals remain strong, with only 4% of landlords reporting they have made a loss.
Confidence in the PRS Collapses…
Landlord confidence has collapsed, according to the survey of 700 landlords. In the second quarter of 2019, just 29% were confident in the prospects for their buy-to-let business over the next three months. That is down from 44% at the same time last year.
Only 15% are confident in the PRS, down from 21% a year ago.
Despite a Rise in Rental Demand…
Tenant demand is motoring ahead, with more than a third of landlords reporting an increase in demand for their rental properties. Strongest demand is to be found in Wales, East of England, Yorkshire and the Humber, West Midlands, East Midlands and the South West. Demand is weakest in London and the South East.
Overall, the rise in demand for properties rose from 10% to 23% between the two latest quarters.
And Only a Handful of Landlords Making a Loss…
Just 4% of landlords report making a loss in the second quarter of 2019.
And a Third of Landlords Making a Full-Time Living…
Yes, that’s right. A third of the landlords surveyed by BVA BDRC reported that they make a full-time living from their buy-to-let portfolio. They don’t have to work for a living. Imagine that.
And More Than Half of Landlords Receive Enough Income to Work Less
On top of the third of landlords who no longer have to work for a living, 53% report that their rental income supplements their wages from their day job. This means they can afford to work fewer hours, do less overtime, and spend more time doing the things they really want to do. If only 53% of the entire population had some way of doing the same.
In fact, despite all of the regulatory and tax changes introduced in the UK over the last few years, and the media reports of doom for all landlords, the number of landlords who report making a profit from their rental properties has fallen by only 1% from the previous quarter.
Confidence in Making a Capital Gain Falls…
The survey also found that fewer landlords expect the value of the properties to rise, with only 23% expecting to make capital gains as against 32% in the second quarter of 2018.
Though House Prices Are Rising…
ONS figures show that house prices are still rising in the UK. In June, average house prices were 0.9% higher than a year earlier. Some regions are faring better than others. For example, the East Midlands saw its average house price rise by 3.2% over the year.
Between May and June 2019, only the South West saw a fall in its average house price (-0.04%). Otherwise:
- The North East experienced the greatest monthly price rise, up by 1.6%
- In the East Midlands, house prices rose by an average of 1.6% on the month
- The South East experienced an increase of 1.1% on the month
- The East of England, London, West Midlands, and Yorkshire and the Humber all recorded a monthly price increase of between 0.5% and 0.9%
And Landlords Are Borrowing More
Landlords are borrowing more. In 2018 there was a 4% increase in the amount borrowed via buy-to-let mortgages on the previous year, and in the second quarter of 2019 borrowing has remained at these levels.
Landlords Are Less Confident of Rental Yields…
The BVA BDRC survey also found that fewer landlords are confident in the prospect for rental yields. A little strange, like so many landlords, have little faith that property prices will rise. Rental yields fall because of higher property prices and/or lower rents. Only 39% of landlords are confident of rental yields, down 10% on a year earlier, and the lowest measurement in more than nine years.
Despite Rents Rising Faster Than Inflation
HomeLet’s latest Rental Index showed that rents are rising strongly in the UK, with the average rent in July of £959 per month now up by 2.3% in a year – faster than inflation.
With the UK’s average house price standing at £230,292, average rental yields are now 5%. You cannot get that yield on savings accounts or from share dividends.
Why Are Perception and Reality so Different?
Landlords are not confident of capital gains. Yet house prices are rising.
Landlords are not confident of rental yields. Yet rents are increasing and yields are strong.
Landlords are not confident of the PRS. Yet demand is up, and landlords are borrowing more to invest.
Why is perception and reality so different? The reason is that landlords are listening to false landlord news, instead of discovering what is really happening. Newspapers love nothing more than a doom and gloom story. So that is what they broadcast and print. And that affects the way that people feel about the world, including buy-to-let landlords.
Our advice is to ignore the landlord news headlines and delve a little deeper. Understand what is really happening – like 53% of landlords having to work less because of their rental income, and a third of landlords making a full-time wage from their rental income. Now that is the real landlord news.
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