Landlord Confidence Index (LCI) No.19: 2023 Q3
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Page 1 - Additional commentary
The Landlord Confidence Index has broken out of the downward trend it has been in since 2021 Qtr 4 with a sharp upward movement.
In Quarter 3 the Index rose from its all time low of 31.3 to 39.2 – one of the largest quarter-by-quarter increases in confidence the index has recorded. This growth in confidence can be put down to several factors.
These include, firstly, the relative stability of the macro-economy: interest rates levelling and inflation rates falling. Secondly, government announcements - the withdrawal of the threat of imminent EPC target changes.
Finally, government assurances on court reform and Section 21. In Wales, where confidence has grown even more strongly, an additional factor has been the conclusion of the painful transition to the requirements of the Renting Homes (Wales) Act.
As a result, confidence grew in each and every English region as well as Wales. This is only the second time (the other being 2021 Qtr1) this has happened since the index started.
However, this short-term shift in confidence has yet to translate into longer term planning, with plans to buy and sell still at the lows and highs previously recorded.
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Page 2 - Additional commentary
If this increase in confidence right across England & Wales is sustainable, then it might be expected landlord confidence will translate into more positive action on the PRS supply side.
Landlord perception of tenant demand remains at the record high levels of the last 18months. Yet the proportion of landlords planning to buy and sell property remain at record lows and record highs respectively. Whilst 42% of landlords state they will reduce their portfolio over the next twelve months, just 10% of landlords state they will buy.
Looking back over the previous twelve months, just 8% of landlords stated they bought property over this period. More than twice as many landlords however stated they had sold property.
The reasons given by landlords for altering the size of their portfolios are negative – tax changes (MIR/Section 24 hurting landlords with BTL mortgages all the more now interest rates have risen); interest rates; inflation rates; landlord costs (especially property maintenance): these factors are driving landlords to act by selling property AND raising rents.
When interest rates were low, landlords typically did not raise rents – see previous editions of the LCI for details. Now however record proportions of landlords are having to raise rents because of the reasons mentioned above.
