Landlord confidence falls despite rising profitability

Landlords are more likely to be making a profit than they were 15 years ago, yet fewer than a quarter are confident about their business prospects.

That’s according to research from Pegasus Insight which found that 23% were confident about the future of their letting business, down from 63% in 2011.

Its comparison covers landlords’ financial performance, investment intentions and borrowing behaviour over the period.

The proportion reporting a profit rose from 82% to 85%.

Tax and regulation pressures

Bethan Cooke, director of the firm, said: “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.”

She added: “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.”

Landlord portfolios shrink

The average landlord is now aged 63, compared with 56 in 2011, while the average portfolio has shrunk from 11.8 properties to eight.

Pegasus Insight said the changing landlord population had implications for lenders’ product design and appetite for risk.

Outright ownership has become more common, with 43% owning their entire portfolio without borrowing, up from 25%.

Meanwhile, 24% of landlords hold at least one property in a limited company, compared with 17% in the third quarter of 2020.

Among those with company-owned properties, the average number held this way has risen from 7.6 to 12.7.