UK Landlords Bouncing Back after Initial Covid CrisisBy Mark Long
Insights from Q2 of our Landlords Panel report
Just after the lockdown was announced, as you can imagine, we found business sentiment among investors had reached its lowest ebb in 14 years of our quarterly tracking. The data comes from our survey of a sample of National Residential Landlords Association members in March.
Landlords were reacting to an initial tsunami of bad news linked to non-payment of rents, reducing demand, extended void periods, new legal protection for tenants, and their own employment status and income (most investors have ‘day jobs’ in addition to managing their lettings activity).
Three months on, and confidence is flowing back into the sector:
In particular, landlords are feeling much more upbeat about the prospects for their yields, the PRS generally, and most importantly, their own business prospects. From this flows a sense of optimism and even plans for portfolio expansion for more experienced investors. 17% of the 1,300 landlords we interviewed in the Landlords Panel Q2 survey stated an intention to add at least one property to their portfolio in the next 12 months, rising to 3 in 10 of those with 20+ properties already under management, investor rationale included:
“There appear to be bargains in the market both in relation to sales and lenders’ products. This will help achieve a greater yield initially.’
“We have had ups and downs with our portfolio but generally it has been a positive [experience]. We are generating a healthy profit and wish to grow the portfolio to help more people find better housing. We always renovate our properties to a high standard and keep them well maintained as it is cheaper in the long run.”
Landlords in the East Midlands, North West and North East are most likely to be in expansion mode in the coming months, it’s not a coincidence that these regions were among the highest yield generators in Q2.
Unsurprisingly, Covid continues to exert a significant negative pressure on the PRS:
- Almost half of landlords have experienced Covid-19 related issues across their portfolio, primarily dealing with reduced rental income (40%).
- 18% of impacted landlords intend to increase rents to re-coup lost income.
- Around 1 in 10 leveraged landlords have requested, and been granted, a mortgage repayment deferral, with repayments typically postponed for 3 months.
The impact varies based on an investor’s portfolio structure, location and tenant profile. For example, almost 1 in 5 landlords operate in the student letting segment, and the major uncertainty around physical access to universities is biting in that part of the market…
“We are critically dependent upon the student market, but university students don't know what will happen in the autumn as yet, so we have no confirmed bookings from September.”
Looking forward, buy-to-let landlords face a significant set of new challenges as mortgage and rental payment deferral schemes come to an end. I thought this landlord summed things up quite succinctly:
“It is unclear what the long-term fallout of the coronavirus pandemic is going to be. It is getting worse as people run out of money to pay their rent. My tenants reached June and then it all started to become too hard and they wanted rental holidays. The word ‘holiday’ has got them keen to take a break from the rent, but it’s only a deferral. Who wouldn’t want a holiday!”
Please talk to us if you’d like to know more about landlords' attitudes and coping strategies during these turbulent times.