Landlords’ predictions for UK rental market remain optimistic

 

Landlords operating in the UK are looking to both increase and diversify their portfolios, with predictions of ongoing strength in demand for rental homes. 

A climate of high tenant demand, rising house prices and a strong employment market are combing to increase the positive outlooks of many landlords across the UK. While predictions generally mark out a slowdown in the drastic growth we have seen recently, the sector shows no signs of losing strength.

This is echoed in a new survey published by Handelsbanken, which found that 86% of the 120 portfolio landlords surveyed expect demand to increase in the year ahead. Of these, almost half (49%) expect demand to rise significantly.

Those landlords with larger portfolios were the most positive when it came to future predictions for the sector. More than three quarters (76%) of landlords with eight or nine rental homes are actively looking to invest in the year ahead. Only 4% of all those surveyed were planning to sell.

Predictions across sectors

Of the 120 landlords in the survey, 74% plan to either retain their current property portfolio or to add to it, further showing the optimism felt by property investors in the UK housing market post-pandemic. A further 8% said they would keep it the same but improve the quality.

On this topic, the most successful property investors and landlords are known for diversifying and remaining agile when market conditions change, which could involve investing in a new location or a different property type.

Handelsbanken’s survey also narrowed down the results based on what investors were planning to look at next. Of those looking to expand, 73% want to look at new sectors while 58% might seek a different location.

Over the coming 12 months, landlords’ predictions lean towards the strength of residential houses, with 66% saying this was the most attractive asset class. This is followed by residential flats for 38% of investors.

Interestingly, houses in multiple occupation (HMO), which have seen a major rise in popularity among property investors, as well as tenants looking for more affordable, communal living, are also expected to perform well. More than a third (34%) were optimistic about this property type.

Pandemic pressures

The effects of Covid on the property market were at their most severe in the year of the outbreak. Just 90,810 residential property transactions were completed between April 2020 and May 2021, down more than 100,000.

Yet, since then, as anyone following the market will know, housing market activity has soared to heights even surpassing the pre-pandemic year. The 2021/2022 financial year saw more than 200,000 property transactions, and predictions for the current year are the same.

This is despite the challenges posed by the cost-of-living crisis, inflation, rising interest rates, and global and political unease. But as the study points out, the effects of this cannot be ignored, and are likely to have some impact on the housing market despite its resilience.

The survey looks at the particular difficulties faced by landlords as a result of the pandemic. More than half (52%) said more eviction action was required than usual. A further 41% reported more void months than usual, while 34% were put off urban areas due to the rise in home-working.

People are adjusting

From tenants and landlords to homeowners and workers, everyone is still adjusting to the changes created by the pandemic, and navigating the current economic challenges. This can make predictions more difficult to make, but the view from this survey is one of positivity overall.

James Sproule, UK Chief Economist, at Handelsbanken comments: “Recent house price growth shows how property has shown its resilience against economic doom and gloom and the cost-of-living squeeze.

“Landlords are anticipating that a shortage of rental properties will help keep prices buoyant, particularly as working patterns continue to adjust to the post pandemic world and people seek to move back to big cities, particularly in popular areas such as London, which is also seen to be better placed to ride out the next series of economic challenges and opportunities.

“Landlords went through a tough period following the COVID-19 pandemic, with residential property transactions falling by more than half and business investment contracting. But the sector has survived and is now looking forward.

“The 2022-23 financial year is forecast to see a further softening in residential property transactions as vendors wait for the right buyer rather than accept any perception of loss in value.”

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Landlords’ predictions for UK rental market remain optimistic

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