Few would deny that being a private rental sector (PRS) landlord over the past decade or so has been something of a rollercoaster.
In that time, landlords have had to adapt to changing taxation rules, increased stamp duty costs, and a raft of necessary changes in order to ensure their properties meet the standards required of them.
This has not been easy but, for the most part, landlords have borne these increased costs because high-quality private rental sector (PRS) property is important, especially when you consider how necessary it is in meeting the UK’s housing gap.
During that time, landlords might have felt burdened by some of the other housing market challenges, for instance, the lack of housing supply or the difficulties first-time buyers have in getting on the ladder, but this has not stopped them from seeking to add to their portfolios and increase the overall supply, even with the increased costs of doing that.
In more recent times we appear to have a government more engaged with the PRS and accepting that landlords are vital in terms of what it wants to do with housing stock and options. Perhaps the decision to include additional property owners such as landlords within the stamp duty holiday is the first step, and hopefully with more to come.
Certainly, it has been picked up by both amateur and professional landlords alike as something of a ‘new start’ and potentially the catalyst for more activity in buy-to-let mortgage lending and in supplying the different types of properties needed by the PRS.
When it comes to portfolio landlord activity, we’ve undoubtedly seen something of a sea change in recent years. Even before the stamp duty (or equivalent) holiday was announced – and bear in mind it is available to landlords in England, Scotland and Northern Ireland (albeit at different levels) but not in Wales – there was a growing confidence amongst landlords in general, but particularly portfolio landlords, in their own letting businesses, the profitability of those portfolios and, subsequently, their future expansion plans.
The quarterly BVA BDRC landlord survey shows this. The most recent results available are from Q3 this year:
• 30% of landlords have good/very good confidence in their own letting business – up from just 19% in Q1. (slide 19 of Q3 report and slide 16 of Q1)
• 86% of landlords are making a profit, and the more properties a landlord has the more likely it is this will be the case. (slide 32)
• 28% plan to remortgage (Q3 slide 79) –, particularly portfolio landlords of whom 34% expect to be active. (Q3 slide 79)
• 7% of landlords intend to purchase as a result of the stamp duty holiday available to them, this increases to 13% for those landlords who own between 11 and 19 properties.
For advisers, the rewards should be obvious, given that only two out of three landlords in the Q2 landlord survey say they will use an adviser if they intend to remortgage this year, there must be an opportunity to show to such landlords how they can save money, time and resource, in using an adviser’s services rather than doing all that work themselves.
And of course, these landlords will be benefiting from a strong community of lenders, including Foundation, who are completely set-up to deal with portfolio landlords, who (in our case) don’t require business plans, or asset or liability statements, who have no limits on the size of a portfolio, who have bespoke stress tests for the background portfolio, have simple forms and processes, and offer all buy-to-let products to them.
The portfolio landlord is undoubtedly better catered for now than perhaps ever before, and both advisers and their clients are likely to be more confident about their positions than they have been for some time. Marrying that up should ensure advisers are in a particularly good place to support such clients and to not only help them develop their letting businesses, but also grow their own.
George Gee is commercial director at Foundation Home Loans