Nine in 10 landlords no longer believe property will beat inflation

For decades, the case for buy to let rested on one quiet assumption: that property values would rise over time. New survey data suggests landlords have stopped believing it.

When the Property118 Landlord Sentiment Survey asked landlords in Q2 what they expected to happen to property values over the next three years, the answers were sobering.

Almost half, 48.7%, expect values to stagnate or fall behind inflation. A further 43.3% expect them merely to keep pace with inflation. Only 8% anticipate real-terms growth.

Put another way, more than nine in 10 landlords do not expect property to outpace inflation over the next three years.

Why this figure matters more than it looks

Rental yield has always been only half of the buy to let equation. The other half, the part that made the sums work despite tax and regulation, was capital appreciation. Landlords accepted thinner margins on rent because the asset itself was expected to grow.

Take away the expectation of growth, and the entire investment case has to be re-examined. If a property is not going to rise in real terms, then every cost levied against it, higher borrowing, Section 24, tighter regulation, EPC upgrades, has to be justified out of rental income alone. For many landlords, that arithmetic no longer works.

The confidence story, in context

This was a new question for Q2, so there is no direct Q1 comparison. But it does not sit in isolation. It arrived in the same survey that showed the intention to sell or exit strengthening, and it helps explain why.

A landlord who expects strong capital growth can ride out a difficult few years. A landlord who expects none has far less reason to absorb rising costs and mounting regulation. The collapse in value optimism and the hardening exit intention are two sides of the same coin.

A rational response, not a panic

It would be easy to read these numbers as gloom. They are better understood as calculation. The typical respondent owns around five properties and has been a landlord for years. These are not speculators; they are experienced investors weighing returns against risk.

When experienced investors conclude, in overwhelming numbers, that an asset class will not beat inflation, that is not a mood. It is a verdict. And it is one policymakers should note, because a sector that no longer expects to be rewarded for holding property is a sector that will, in time, hold less of it.

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