LRG data shows impact of new Act not as bad as feared

Professional landlords are not being hit as hard by the Renters’ Rights Act as was first feared, according to analysis of data from LRG’s Living Markets division.

LRG found that six months after the act came into force on May 1, it has yet to have any significant negative impact on its corporate landlord clients.

Across LRG’s corporate lettings division’s client base, which comprises landlords with a typical portfolio size of 50-plus properties, LRG found that arrears of more than 30 days have fallen compared with the six months before the Act. They are down from an average of 3.3% to 2.7% while annual rent rises are up from 5.7% to 6.0%.

‘Relatively unaffected’

Adam Hills, client services director at LRG Living Markets, said: “There was some concern about the Renters’ Rights Act prior to its implementation, but thus far landlords at the larger end of the spectrum seem to have been relatively unaffected.”

He said there had also been little change to tenancies. “Both rent levels and arrears have improved and we’ve not seen the uptick in tenant turnover many feared when tenancies became periodic from day one.

“Initially, many believed that the end of fixed terms could lead to tenants moving in and out within short periods of time. Although it’s still too early for us to report definitively on any changes in annual average tenancy lengths, so far we’ve seen no evidence of this happening across our portfolio of landlords.

Hills said the smoother-than-expected transition, coupled with the fact that landlords owning property in company structures had emerged unscathed from the recent Budget, was encouraging many corporate investors to expand. “Some 82% of our clients are actively planning to scale their businesses, with one aiming to increase its portfolio from 500 to 10,000 in the coming years,” he said.

Bigger ambitions for some

Although some expansion is coming from the purchase of properties from smaller landlords looking to exit the market, some professional landlords are aiming much higher, according to Hills. “We’re seeing many investors looking for larger-scale opportunities such as entire freehold blocks, commercial buildings ripe for residential conversion and larger portfolios owned by retiring or exiting landlords, as opposed to focusing on single property purchases.”

He said investors have also become more discerning when about yields. “In the past, many considered yields of 8%-plus to be acceptable, but we’ve seen this rise to 10%-plus over the past year as astute professional landlords build in the current market uncertainty and account for any future impact of the changes to rental legislation.”