Landlords are experiencing a crisis of confidence despite resilient financial performance, new research indicates.

Just 23% of landlords are confident about the prospects for their own letting business, compared with 63% in 2011. 

Yet 85% report making a profit, up from 82%, while the proportion experiencing rental arrears has fallen from 50% to 28%. Average rental yields have remained relatively steady at 6.4%, compared with 6.7% in 2011.

The figures come from a Pegasus Insight study.

The findings also reveal a changing landlord demographic, with implications for lenders’ product design and risk appetite. 

The average landlord is now 63, compared with 56 in 2011, while average portfolio size has fallen from 11.8 properties to eight. The average number of buy-to-let mortgages has declined from 8.8 to 5.9, while the proportion of landlords owning their entire portfolios outright has risen from 25% to 43%.

Alongside these changes, landlords’ relationship with the sector has deteriorated markedly. Only 25% feel positive about being a landlord, down from 77% in 2011, while just 2% believe landlords are respected, compared with 7% previously.

Almost nine in ten (89%) say being a landlord has become harder in recent years, up from 66% in 2011. Meanwhile, the proportion saying it allows them to earn a living has fallen from 62% to 48%, highlighting the distinction between reporting a profit and feeling that letting property provides a worthwhile livelihood.

Limited company ownership has also become more widespread. 

Almost a quarter of landlords (24%) hold at least one property in a limited company, up from 17% in Q3 2020. Among landlords with incorporated properties, the average number held in a company has risen from 7.6 to 12.7, representing 75% of their portfolios compared with 57% six years ago.

Bethan Cooke, director of Pegasus Insight, says: “The gap between performance and confidence becomes more understandable when you consider the cumulative effect of government policy. 

“Successive Conservative and Labour governments have left landlords feeling that their contribution is undervalued and wondering where the next additional cost or obligation will come from.

“George Osborne’s announcement in 2015 restricting mortgage interest tax relief marked a turning point. Since then, repeated changes to taxation and regulation have reinforced the feeling that the pressure only moves in one direction, with last week’s Budget adding to those concerns.

“A landlord can run a profitable business and still decide that further investment is no longer worth the uncertainty or effort. That is the risk these findings expose. With housing already in short supply, we need an environment in which responsible landlords feel confident about continuing to provide homes.”