The year ahead could present some strong buying opportunities for buy-to-let investors, with professional landlords in particular expected to remain resilient.
With more stability returning to the market thanks to falling inflation, greater competition in the mortgage market and growth in buyer confidence, many are hopeful that the year ahead will provide more favourable conditions for investors and the wider housing market.
In the investment space, the latest economic improvements have boosted confidence among buy-to-let landlords, according to the latest figures from Paragon Bank. It found that 49% of landlords think their rental yields outlook is good or very good for Q3, which is up 16% on the previous quarter’s responses.
The study also found that the general confidence of property investors operating in the UK lettings space increased by 8% in Q3 compared with Q2, and 6% more landlords expected to achieve capital gains on their property or properties.
The level of confidence among investors in the buy-to-let space may have been boosted even further since this survey was carried out, according to comments from Richard Rowntree, Paragon’s managing director of mortgages, since the announcement that Section 21 eviction changes would be delayed until court reforms were enacted.
More confident than in 2022
In a sign of how the outlook has improved over the past year in terms of investor confidence, Paragon Bank points out that optimism is higher now than it was a year ago “about all aspects of letting, with the exception of capital gains…particularly with respect to rental yields.”
Paragon Bank managing director of mortgages Richard Rowntree says: “Landlords play a vital role in the UK’s housing provision, so it is important that they feel confident in the investment environment, particularly at a time when demand continues to outstrip supply.
“Although there is still work to be done on all sides as we work to improve the private rented sector for both tenants and landlords, we’re encouraged by signs that the value of private investment is being recognised by government.”
This is a message that has been echoed by a number of industry body in recent years, as the gap between supply and demand has grown wider than ever, creating a difficult market for tenants.
For example, research from the NRLA found that rental demand has tripled since the pandemic, while there is some evidence that landlord numbers have dwindled at the same time. The body has called on the government multiple times to bring in more measures to encourage investment from landlords, to provide more homes for tenants.
“Resilient” professional landlords will push ahead
Despite the recent difficulties faced by many of those involved in the housing market, from homeowners to investors and even tenants, professionals in the buy-to-let space have remained resilient, according to Nigel Terrington, Paragon Bank CEO.
He states that he is currently optimistic about the rental space because of this resilience among professional landlords, and believes that this outlook is set to continue, with professional buy-to-let owners being able to look at the current environment as a “buying opportunity”.
Rental yields are strong at the moment, he acknowledges, while softening house prices and mortgage rates are all providing an additional boost to the market and encouraging buyers to seek opportunities.
“I think the conditions are kind of quite favourable for that,” he said.
Stability and certainty will both be key factors affecting what happens in the market in the new year, added Terrington, and commenting on the latest inflation news he stated that “the medicine appears to be working”.
“I think we’re quietly optimistic without getting carried away, but like all businesses and all people we just need some certainty,” he said.
