The vast majority of limited company landlords are expecting stronger returns over the next year, despite higher costs and tighter regulation in the private rented sector.
New research from Kensington Mortgages reveals that 84% of residential limited company landlords expect rental yields to increase over the next 12 months, while 89% say they are confident in the long-term outlook for the UK rental market.
More than three-quarters (77%) of landlords, though, anticipate mortgage costs will increase, while 81% report that running costs – including repairs, insurance and maintenance – have already risen over the past year. A similar proportion (79%) expect the regulatory environment to become more challenging.
Landlords expect rental demand to rise
At the same time, however, four out of five (80%) landlords expect rental demand to rise, and 77% believe property prices will increase over the same period, strengthening the income and capital growth case for investment.
Interest rates remain the single biggest influencers of market sentiment, cited by 31% of respondents, followed by regulation (26%), property prices (25%) and rental demand (25%). Broader economic conditions (22%), mortgage availability (22%) and taxation (20%) were also highlighted.
Landlords’ plans for the next 12 months suggest they will be taking a steady, long-term approach. Just over half (53%) plan to maintain the size of their portfolio over the next year, while 38% intend to expand. Only 8% are considering reducing their holdings, and fewer than 1% say they plan to exit the buy-to-let market altogether.
Access to finance not a significant barrier
Access to finance does not appear to be a significant barrier at present, with 74% of landlords saying they find it easy to secure buy-to-let mortgage funding. This is helping support both portfolio stability and selective growth, despite widespread expectations that borrowing costs will rise.
The research also highlights how landlords are structuring their investments. More than half (53%) now hold their entire portfolio in a limited company, and those employing both structures report slightly stronger returns from company-held assets. Average gross rental yields are 5.04% for limited company portfolios, compared with 4.88% for personally held properties.
In terms of asset mix – family homes dominate, making up 40% of portfolios. Larger HMOs with six or more bedrooms account for 35%, followed by single-tenant properties at 33%. Smaller HMOs, holiday lets, and student accommodation are less common.
Landlords report increasing their exposure primarily to family homes (21%), single-tenant properties (20%) and larger HMOs (16%).
95% looking to broaden their portfolios
Almost all respondents (95%) say they are looking to broaden their portfolios into different property types. Corporate lets are the most commonly cited (37%), followed by larger HMOs (18%), family homes (17%) and single-tenant properties (13%).
Kensington Mortgages Chief Executive Officer Allison Buckley says:
“The latest findings from our BTL Barometer underline the resilience and professionalism of today’s limited company landlords.
Landlords remain firmly committed to the sector
“Despite experiencing higher operating expenses and anticipating increased mortgage costs and greater regulatory complexity ahead, landlords remain firmly committed to the sector – underpinned by strong tenant demand and expectations of improving yields.
“What’s particularly notable is that confidence is not translating into complacency. Many landlords are actively reviewing and diversifying their portfolios, with growing interest in corporate lets and larger HMOs, demonstrating a clear focus on long-term income and adaptability.”
