Sunak’s EPC U-turn slows landlord exodus as gloom lifts

Landlord confidence has improved over the course of the past quarter according to a respected quarterly sentiment survey.

The Q3 2023 BVA BDRC Landlord Panel research report for Foundation Home Loans is the first since the government chose to delay scrapping Section 21 until court reforms have kicked in, and to row back from stricter mandatory EPC levels. 

Some 12 per cent of landlord respondents said the EPC U-turn meant they would be able to stay in the rental market and after five consecutive increases in figures showing landlords ready to quit the sector, this most recent quarter reveals the figure actually falling - from 37 per cent in Q2 to 28 per cent in Q3.

While eight per cent of all landlords planned to increase the size of their portfolio over the next year, larger portfolio landlords were more likely to purchase - some 18 per cent of landlords with 20 or more properties said they would add to their portfolios in the coming year.

Some 71 per cent of landlords reported an increase in tenant demand, up by four per cent since the last quarter and reaching an all-time high. Only three per cent of landlords reported a decrease in tenant demand.

The increase in tenant demand, coupled with ongoing private rental stock shortage, meant the proportion of landlords who had seen rising rents in the last year was up five per cent on the last quarter’s results. Rental yield also risen slightly quarter-on-quarter, to 5.3 per cent.

Grant Hendry, director of sales at Foundation Home Loans, says: “There are clearly a large number of factors for each individual landlord to take into account when looking at the performance of their own portfolio, and their optimism – or otherwise – for the future. However, it’s clearly good news to see a significant shift in positivity from landlords across a number of aspects, and to see confidence having risen quarter-on-quarter.

“Certainly, overall strong tenant demand is playing a major part here, as perhaps is the belief that mortgage rates may now have topped out, and that the market is finally shifting southwards, with more competitive rates meaning stronger affordability.

“The Government’s announcement on minimum EPC levels not moving up to C and above was perhaps a relief to many, particularly in the short-term, and for a number it may make the difference in terms of them staying invested in the sector.

“The number of landlords saying they plan to divest over the next 12 months has fallen, and this may partly be due to the retraction of the energy efficiency regulations for the PRS, but this should not detract from the need for rental properties to be as energy-efficient as possible, particularly in light of the increased utility bills all households have suffered in recent years.

“While it is too early to say whether we are seeing the start of a new trend line, there appear to be many more landlords feeling optimistic about their future within the PRS, and if this means landlords can keep much-needed housing supply available to tenants, then this can only be viewed as a positive.”

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