Landlord confidence rises amidst Renters’ Rights Bill concerns

There has been a rise in landlord optimism, despite the introduction of higher Capital Gains Tax (CGT) and the potential impact of the Renters’ Rights Bill.

The latest Landlord Trends report from Pegasus Insight for the last quarter of 2024 shows that landlord confidence has increased year-on-year.

The research shows that 37% of landlords express ‘good’ or ‘very good’ prospects compared to 33% a year before.

Landlords who say they make a ‘large profit’ are most likely to feel upbeat (71%), though this falls to 33% for landlords making a ‘small’ profit.

For landlords who are either breaking even or loss making, the figure is 8%.

Improving landlord confidence

Bethan Cooke, a director of the firm, said: “Improving landlord confidence is testament to the resilience of the buy to let sector and the strength of the fundamental economics underpinning this market, fundamentals which the Renters’ Rights Bill will only serve to reinforce.

“If this new Bill forces more landlords to exit the market, it will further deepen the supply/demand imbalance which pushed average rents to unprecedented levels last year.”

She adds: “What’s more, as the legislative threat builds, so does the pressure for landlords to pre-emptively increase rents to future-proof their businesses.”

Impact of the Renters’ Rights Bill

This upward trend in sentiment comes despite growing concerns over the potential impact of the Renters’ Rights Bill.

Pegasus says that around three-quarters of landlords believe the Bill will negatively impact their lettings business, with 43% significantly so.

This concern extends to the broader private rented sector, with 65% believing the Bill will have a significant negative impact.

Despite 73% of landlords increasing rents last year, more than 80% are currently renting out at least one property at below-market rates.

Those landlords letting at below-market rates believe they are subsidising an average of 4.7 properties, typically by £144 each per month.

Average achieved rental yield

Even with these landlord subsidies, the average achieved rental yield remains close to the Q3 2024 10-year high, at 6.4%.

Ms Cooke said: “Those landlords charging below-market rates may currently be compromising on revenue in order to retain good tenants but may not feel they have the option of continuing to do so in a more restrictive environment.

“The long-term profitability trend for the buy to let market is stable, and prospects for the sector remain very good.

“So, while the Renter’s Rights Bill may make life more difficult for landlords, the unintended consequences are likely to be much harder on tenants themselves.”