"This positive outlook is encouraging, although not surprising"
LRG surveyed 271 landlords across its estate agency brands Gibbs Gillespie, Hose Rhodes Dickson, Leaders, Moginie James, Portico, Romans and Scott Fraser.
The survey, which included all regions of Great Britain, revealed that 27% of landlords saw supply and demand (‘a shortage of rental properties in my area’) as a positive sign for future BTL investments. Furthermore, 24% saw increased rental yields as a positive sign.
However, when surveyed on the top three opportunities in the Private Rental Sector in 2023, only a small proportion (7%) felt that energy efficiency upgrades would benefit the profitably of their investments by attracting higher rents.
Allison Thompson, Managing Director for Lettings, at LRG said: “We commissioned this research because it’s important that we fully understand landlords’ point of view at this uncertain time. This positive outlook is encouraging, although not surprising.
“Taking on an investment property, or expanding an investment portfolio, is invariably a good financial decision. In the current market, there are two particularly good reasons to invest in rental property. The first is the significant shortage of rental stock: rents have been rising very well over the past couple of years, for the simple reason that there is a huge amount of demand from tenants and simply not enough available accommodation.
"This competition for new lets has pushed prices up, as many tenants have been prepared to pay over the advertised rental amount to secure a decent home.
“The second is that if property prices fall, it’s a great time to pick up a bargain. There will increasingly be sellers who are struggling to pay higher mortgage rates, along with the usual reasons for selling. If you can offer them a quick deal, that gives you some bargaining power to negotiate a reduction in price. And whatever discount you manage to get translates to instant equity in the property and can improve the property’s income returns too.
“It is interesting to see that only a small portion of landlords believe that energy efficiency in a property will attract tenants. While this may be true currently, it’s important to bear in mind that with a Government target of net-zero carbon emissions by 2050, sustainable properties will be a legal requirement over the long term.
"Furthermore, with rising energy bills we believe that energy efficiency in properties will become increasingly important to tenants, and from a landlord’s point of view, can help secure tenants for the longer term.
“So it's important that landlords get good advice on each of these factors. They should also to research supply and demand in their own areas, to make sure that the properties that they buy will not only let well in the current market but into the future. Tenant types can vary enormously from one part of a town or city to another, so work with local experts to ensure your purchase has good long-term prospects.”
These figures are part of a larger piece of research, the first part of which was released in late February and identified generally positive sentiment among landlords - revealing that only 7% of landlords plan to exit the BTL market in the next year and only 12% plan to reduce their portfolio despite speculation to the contrary.
