Landlord Confidence Index (LCI) no.12: 2021 Q4
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Page 1 - additional commentary
Nationally the Landlord Confidence Index for Quarter 4 stands at -0.3. Given the Confidence Index scale runs from -100 to +100 we can say that confidence is “broadly neutral”.
This score of -0.3 is the highest recorded by the index since it was launched in 2019. It is the third consecutive quarter the LCI has achieved a record high. In quarter 3, the LCI was -5.1 and the quarter before that -8.0.
In 2021 Quarter 2, the index recorded its first ever positive score (Yorks and the Humber +0.7). This quarter six regions recorded positive scores (North West; Yorks and the Humber; both the East and the West Midlands; South East; South West and Outer London).
Of the remainder, Inner London recorded a slight fall in confidence, whilst in Wales there was a small rise (the reality is both are basically unchanged). Only in the North East has confidence dipped – from -5.3 in Quarter 3 to -11.0 this quarter. Perhaps also important is that the gap in confidence between Inner London (-5.9) and Outer London (+3.6) is the widest it has been since the index started.
Note that the index is based on where landlords say their portfolio is “mostly focused” not where landlords reside.
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Page 2 - additional commentary
Over a fifth of landlords cite costs as a reason for adjusting their portfolios. New on the list of reasons to buy or sell is “Changes to expected market conditions” – this appears to be a stronger motivator for those who have either reduced or planning to reduce their portfolio than those who have/are planning to expand.
For rent, costs are the big driver. Not only are 52% of landlords planning to increase rent over the next twelve months, almost 40% of all landlords cite rising costs as a reason to adjust rent. Note that landlord costs have risen in importance throughout 2021. In Quarter 1, 26% cited rising costs as a factor in adjusting rents. This quarter that figure stands at 38% - an increase of around 50%.
Landlords are however also seeing tenant demand increase. “Net sentiment” is simply those landlords noticing demand increase, less those noticing demand fall. Note that only landlords who have looked for tenants in the last three months are included. The data shows the difference in the proportion of landlords between these two increasing steadily.
Despite the increasing demand there is little compulsion among landlords to expand their portfolios – confirming analysis of lending data from the Bank of England. The prospect of rising costs may be encouraging landlords to sell rather than buy in a market in which house prices are presently rising.
