How do landlords see the future of the rental market?

In Full...

The rental market is always changing and landlords are central to this evolution. The industry has been going through various changes in the past few years - changes that’ll have a tangible effect on the future of private renting in the UK.

According to ARLA Propertymark, landlords now have to comply with over 100 pieces of legislation. So how has the introduction of factors such as a 3% stamp duty surcharge and Right to Rent affected the outlook of the nation's landlords? And, importantly for you, how can you use landlords' perceptions of the market to the benefit of your agency?

We recently carried out our Landlord Market Survey 2017 - one of the largest landlord studies to date, with almost 4,000 responses. Here's some insight into how landlords see the future of the market shaping up:

Portfolio sizes

It’s often estimated that the typical landlord only has one or two rental properties. Looking forward, are most landlords looking to increase or reduce the size of their portfolios? And does their portfolio size have an effect on their ambition for future expansion?

Here’s what we found:

  • 76% of landlords we spoke to said they plan to keep their portfolio the same size this year
  • 13% said they intend to buy property and expand their portfolio in 2017
  • 11% are planning to sell properties and reduce the size of their portfolios
  • 89% of participants aren’t looking to sell any rental properties

It seems landlords who already have larger portfolios are most willing to invest in new property this year. Some 21% of respondents who own four or more properties said they're looking to expand, compared to an average of 13%.

Interestingly, however, a higher proportion of landlords with four or more properties are also looking to reduce their portfolio size this year - 17% compared to an average of 11%.

This perhaps shows us that the more experienced and professional landlords are less happy to remain inactive and see more value in making a move, whether they're looking to buy or sell.

Rent rises

There's been plenty of talk about landlords raising rents in recent months - particularly since the proposed ban on up-front letting agent fees charged to tenants was announced last November.

Do landlords feel that market forces are pushing them to charge tenants more?

Here's what we found:

  • 18% plan to raise rents in the next six months
  • 19% plan on increasing tenant payments in the next 12 months
  • 15% of participants said they intend to raise rents in over a year
  • 31% aren’t looking to increase the rents they charge
  • 17% said they’re still unsure
  • 52% of all the landlords we spoke to are looking to raise rents - that's down from 57% in 2015

Again, portfolio size seems to encourage a different way of thinking. Just 20% of landlords with a portfolio of four or more properties said they aren't going to raise rents - compared to an average of 31% and 39% of single property landlords. This is bolstered by the finding that 33% of landlords with four or more properties plan to raise rents in the next six months, compared to an average of 18% and just 11% of single-property landlords.

This could perhaps demonstrate that landlords with larger portfolios are more inclined to raise rents over the short-term. This could be down to greater experience of raising rents in the past or perhaps because they have higher running costs and overheads.

Of those landlords who are looking to raise rents, 55% said it’ll be to keep up with inflation and market forces. Only 2% said it’ll be in response to the proposed letting agent upfront fee ban and only 5% said it’ll be to increase profit.

Concerns

With so much change in the market and influences like Brexit to consider, it'd come as no surprise to hear that landlords have several legitimate concerns about the future.

It’s fairly surprising that over a third of landlords have no concerns whatsoever, which is clearly a positive indication of market conditions. It's also interesting to see that controversial policies, such as the proposed ban on upfront fees and Right to Rent, are currently of relatively low concern to the landlords we surveyed.

Satisfaction with tenants

Another aspect of our survey touched upon landlords' relationships with their tenants and whether landlords are happy with the people they’re letting to.

A huge 96% of those surveyed said they were either ‘somewhat happy’, ‘quite happy’ or ‘very happy’ with their current tenants. Compared to last year, a much higher proportion of landlords are ‘quite happy’ as opposed to being ‘somewhat happy’. This year, 35% said they’re ‘quite happy’, up from 23% and only 6% said they were ‘somewhat happy’, down from 20%.

How can you incorporate these findings into your marketing strategy?

Our research shows that most landlords aren’t looking to expand their portfolios this year. Therefore, it may not be the best time to lead with marketing campaigns about additional investment and buying properties.

It may instead be more beneficial to try to educate prospective landlords, tackling issues like buy-to-let tax changes and mortgage lending restrictions.

Similarly to last year's findings, over 50% of landlords we spoke to said they’re looking to raise rents. This presents letting agents with an opportunity to use their market knowledge to inform clients of local averages and the sort of figures they could legitimately charge.

What's more, most participants said they’re happy with their current tenants. This provides you with the opportunity to explain the benefits of things like tenant referencing and encouraging long-term tenants.

When it comes to landlords' concerns, it's clear there is a wide range of issues here. With your knowledge and understanding of the industry, you can help to put their mind at rest. Different marketing campaigns can tackle different issues and, as mentioned above, a focus on education and providing information is often effective.

 

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