Wales landlords: The impact of macro-economic turmoil
Introduction
This is the second in a series of Working Papers produced by the NRLA research team to highlight the supply-side impact of policy and regulation change in the Private Rented Sector (PRS).
The Wales Longitudinal Study, which began in the Autumn of 2023, engages independent residential landlords who let properties in Wales ("Welsh landlords"). This ongoing series of in-depth conversations with landlords aims to provide a continuous dialogue and a deeper understanding of how the PRS in Wales operates.
Wales Longitudinal Study Paper 2: Macro-Economic Environment
WLS
About Wave 1
The first wave of interviews took place in late 2023. The interviews focused on how landlords navigated the Renting Homes (Wales) Act, as well as other regulatory and legislative changes introduced by governments in both Cardiff and London over the last decade.
The aim of Wave 1 was to understand the impact of regulatory change on landlords and the broader PRS in Wales. In doing so, the NRLA provided insight into the experience of being a landlord in Wales in 2023 and 2024 - and how this experience is changing.
The Wave 1 report can be found here.
Wave 2
In this second wave of the study, the focus shifted onto the impact of macroeconomic factors, including inflation and rising interest rates, on the Welsh PRS. The NRLA aimed to understand how residential landlords in Wales are navigating these economic changes and their implications on the rental market.
More on the Wave 2 study
The NRLA conducted focus groups and interviews with landlords with diverse portfolio types and sizes.
Insight and analysis of collected data (which was all anonymised and edited by the NRLA) was carried out by Wordnerds, a Northeast company with expertise in the housing sector. Their expertise in studying natural language processing and text brought insight to the physical and emotional efforts and strains landlords bring when managing their properties.
Key findings
Inflation
Landlords reported significant challenges due to inflation. Rising maintenance and labour costs have been particularly impactful. Many landlords feel conflicted about raising rents, balancing their financial needs with the pressures on tenants.
Interest Rates and investment behaviour
Rising interest rates have strained profit margins for landlords with mortgages, leading to difficult decisions about rent increases and, for some, divestment. Those owning properties outright are less affected, and some even benefit from higher savings interest rates. Investment in new properties has slowed as landlords adopt a cautious approach.
National Policies
Though the focus of these interviews was on the impact of the wider economy, landlords expressed ongoing frustration with regulatory changes – most notably the Renting Homes (Wales) Act (RHW).
The role of Rent Smart Wales, especially during the transition to RHW, was cited as a major difficulty for landlords. The financial and administrative burdens of compliance have led some landlords to consider selling properties or shifting to other markets like holiday lets.
Landlord Confidence
Confidence among Welsh landlords has improved compared to some regions in England, largely due to the completion of major legislative changes such as RHW. In comparison, it was noted that the prospect of the Renters’ Reform Bill in England was informing low confidence.
That said, the recent legislative changes, and uncertainty about how they would transpire, have proved disruptive to landlords in Wales. While there is no optimism for broader economic improvement, landlords feel secure about the continued demand and attractive rents in the Welsh PRS.
Wave 3
Wave 3 will take place in the early part of the Summer of 2024. It will focus on landlord investment. This will include landlord views on the following: what could be done to stimulate new entrants; upgrade energy inefficient properties; and finally, bring property back to residential letting from the holiday market.
If you would like to participate in future waves of research, please contact the NRLA research team via the NRLA's contact page.
Wales Longitudinal Study Paper 2: Macro-Economic Environment
WLS