Why professional landlords still see opportunity despite tougher rules – Leaders

Despite ever-growing stories about landlords in the private rented sector quitting in the face of higher costs and growing legislation, one property sector leader says now is a great time to be a landlord.

Allison Thompson, the national lettings managing director at Leaders, says the picture on the ground differs from the gloomy narrative often painted.

She argues the sector remains resilient for those treating it as a business rather than a sideline.

Ms Thompson said: “For those who run their portfolio as a professional business and take the time to understand the ever-evolving market needs, or work with a qualified agent who takes care of these things for you, buy to let can still deliver great return.”

A great time to be a landlord

She continued: “Rather than being a sector going through a slump, as many headlines seem to suggest, we think it could actually be a great time to be a landlord.”

Ms Thompson says one of the clearest drivers for success is pressure on available homes.

The PRS has struggled to keep pace with population growth, leaving demand consistently ahead of supply across rooms, family houses and longer term lets.

Official figures show the proportion of homes in the PRS peaked at 20.3% in 2016/17 before slipping to 18.8% by 2023, while the overall number of properties has barely shifted.

UK needs rented homes

During the same period, the population rose by nearly 2.5 million, many of whom need rented accommodation.

Social housing shortages have intensified the strain, with 1.3 million households on waiting lists in England and 139,000 in Wales.

That means private landlords continue to fill the gap, with around a third of renting households receiving Universal Credit that includes housing support.

That imbalance brings practical benefits since void periods are usually short, rents tend to edge higher and landlords can be more selective when choosing tenants.

Rents are rising

Ms Thompson says that rents are rising faster than the historic average and adds: “Every month for the past three years, average UK private rents have consistently risen at an annual rate of more than 5%, with an overall average of 7.4% annual growth (ONS) – far in excess of the historic average of around 2%.

“Although growth has slowed this year, in the 12 months to August, average UK rents still increased by 5.7%, up by 5.8% in England and 7.8% in Wales.”

She adds that Zoopla’s latest rental market report shows that rents have grown by 36% since 2020, while average house prices have risen by around 20%.

That has led to yields and income returns improving for most landlords.

Capital growth helps profits

Ms Thompson also highlights that mortgage rates are falling and said: “If you’re buying in the next few months and can make the figures work with today’s rates, when you next come to refinance, you should be able to move to a better deal and see your monthly repayments go down.”

Another big plus, she says, to being a landlord is that capital growth is keeping up with the rate of inflation.

She says: “As a landlord, inflation is one of the most important metrics to track – both for rental income and capital growth – to ensure the value of your investment profits doesn’t drop.

“And the good news is that, although average house prices have been relatively stagnant over the past three years – rising only 1.5% according to Land Registry data – the increases we saw in the previous few years more than compensate for that slowdown.”

Ms Thompson also warns that not every home will grow in value and landlords need to research carefully for the best investment areas to help ensure success.