An interesting insight into the private rental sector
The private rental sector (PRS) is in a state of constant flux – so it’s really important that landlords are clued up on the market for the best possible chance of success.
With that in mind, now seems like a good time to revisit the official English Private Landlords Survey. This nation-wide survey, released in January 2019 which a staggering 8,000 UK letting agents and landlords contributed to, offers a fascinating insight into the private rented sector, shedding light on landlord attitudes, behaviours and responsibilities, and the changing landscape of buy-to-let.
Here we’ve summarised the survey’s key findings, which makes for an interesting read for both landlords and renters:
Who are the nation’s landlords?
Most landlords operate as individuals – not companies.
The survey revealed that most landlords operate as private individuals and non-professionals, (94% rent property as an individual, only 4% rent property as part of a company, and 2% as part of another organisation).
It will be interesting to see how these numbers change as we edge closer to April 2020 when mortgage interest relief is phased out completely.
A third of landlords are retired; over half of landlords are aged 55 or older
It seems the term “pension pot” landlords rings true, as 44% of respondents said they got into buy-to-let to contribute to their pension, while 46% did so because it was preferable to other investments. Only 4% stated that being a landlord is their full-time business.
Given those statistics, it’s no surprise that 59% of landlords are aged 55 years or older, 29% are aged 65 or older, and a third (33%) of landlords are retired. Interestingly, a huge majority (89%) are white.
Buy-to-let is a long game, though many enter the market ‘accidentally’
According to the survey, 70% of landlords have rented out a property for 6 years or over, and the average landlord has been in buy-to-let for 11.5 years.
Although over half (53%) of landlords bought property intending to rent it out, 32% did so to live in themselves. This suggests that many landlords fell into the role accidentally, so finding tenants who’ll look after the property as their own is a top priority.
Almost half of landlords own and rent out just one property
Interestingly, 45% of landlords have just one rental property. 38% own between two and four properties, and the final 17% of landlords own five or more properties (which equates to 48% of the entire rental sector).
Landlords, on average, earn £15,000 per year (before tax)
Landlords’ profits have taken some considerable hits in the last few years, though the average landlord’s gross rental income (before tax and other deductions) was still a healthy £15,000. (Especially when you consider that a third of respondents said becoming a landlord was to supplement earnings or income.)
Three in five (61%) landlords stated their gross rental income was less than £20,000, while (26%) put it between £20,000 and £49,999. Just 13% of landlords reported a gross rental income of £50,000 or more.
Landlord behaviour toward tenancies and changing regulations
Landlords are supportive of longer tenancies
It was great to see support for longer-term tenancies in the survey, with three quarters of landlords and agents very willing to offer longer tenancies of more than 12 months, and another 38% willing if there was a break clause included in the contract.
The majority of landlords don’t raise rents unreasonably
For their most recent tenancy renewal, 70% of landlords chose not to raise the rent. Furthermore, just 7% of landlords and agents had asked the tenant to leave, 7% evicted the tenant and 4% decided not to renew the tenancy.
Landlords are providing safe and secure homes for tenants
Rogue landlords are the subject of numerous press headlines, but the survey highlights that the majority of landlords fulfil their responsibilities and provide safe and secure homes tenants. Nearly all landlords surveyed (99%) installed the necessary smoke alarms, and the large majority (87%) used a qualified Gas Safety Engineer for their property’s annual gas inspection – with 82% providing their tenant with a copy of the Gas Safety Certificate.
However, there is confusion around certain landlord legal requirements
For example, only 52% of landlords provided their most recent tenant with a copy of the government’s How to Rent Guide, compared to 83% of agents – despite this being a legal requirement since 2015.
In addition to this, while 61% of landlords and agents surveyed stated that their properties meet The Minimum Energy Efficiency Standards (MEES), (new regulations which came into force in April 2018), 23% had properties with an E-G rating, which while a further 15% didn’t know their properties’ ratings.
When asked about compliance with legal requirements, those with least compliance were landlords with just one property. It’s these ‘accidental’ landlords who would most benefit from the help of a vigilant letting agent.
So, what does the future hold for the buy-to-let market?
Increased regulation isn’t fazing most landlords, with 53% sitting tight with their existing properties
For landlords, 2019 saw the introduction of even more legislative, tax and regulatory changes, including the introduction of the Homes (Fitness for Human Habitation) Act, the Tenants’ Fee Act, and more. But it seems this increased regulation isn’t fazing the nation’s landlords, with just 10% stating they plan to divest some of their portfolio over the next couple of years, and an even smaller 5% planning on selling all their properties and leaving the rental business altogether.
PRS landlord behaviour
The majority of landlords (53%) said they plan on sitting tight with their existing properties, and 11% said they are likely to invest in more. Clearly the current climate is sound for BTL investors, who can still make very healthy profits if they adopt a pragmatic and clever approach.
However, the 10% of landlords who plan on selling up are doing so because of legislative changes.
Luckily, renters aren’t going to lose out, as property sold by landlords can be picked up by other landlords.
Despite some landlords leaving the sector, the survey suggests that most property that’s being sold by landlords can be picked up by the other landlords who are looking to further invest in buy-to-let. For this reason, we’re unlikely to see a decrease in available housing stock for renters, and the future remains bright for buy-to-let.