Landlords enjoy the PRS boom but fear rent controls

Landlords are reaping the rewards of a booming rental market with record-high yields and robust tenant demand, but the spectre of rent controls is casting a shadow over the sector, a survey reveals.

Average rental yields have soared to a 10-year peak of 6.3%, providing a lucrative environment for property investors.

That’s according to the latest Landlord Trends report commissioned by Foundation Home Loans (FHL).

The research, based on 799 landlord interviews, found that a substantial 82% of landlords describe tenant demand as ‘strong’.

‘Landlords are finding ways to maintain profitability’

FHL’s director of sales, Grant Hendry, said: “Despite a challenging market environment, landlords are finding ways to maintain profitability and expand their portfolios.

“Average rental yields increasing, the ongoing preference for limited company ownership and high tenant demand are all encouraging trends.”

He adds: “The cost of financing properties and portfolios, even with higher yield and strong tenant demand, continues to sit heavily with landlords and is impacting their views on whether now is the time to add to portfolios.

“It is to be hoped the new Government is committed to increasing supply in the PRS, as it certainly requires more housing in order to meet the tenant demand that is so clearly there.”

Landlords financing their portfolios

FHL says that with 60% of landlords financing their portfolios through borrowing and an average of 5.3 loans per landlord, the mortgage market is well-positioned to benefit.

More than a third of landlords plan to remortgage or transfer products within the next year – a refinancing pipeline that could be worth up to £665,000 per landlord.

The report also reveals a growing trend towards limited company ownership among landlords, with 67% of new property acquisitions now held within corporate structures.

Despite rising costs and interest rates, 74% of landlords have increased rents in the past quarter, driven by escalating portfolio management expenses.

Looming threat of rent controls

However, the looming threat of rent controls is causing significant concern for 55% of landlords.

They say rent controls would severely impact their commitment to the PRS, with one in three considering selling their properties if such measures are implemented.

While landlords are less apprehensive about other potential regulatory changes, such as bans on certain tenant types or compulsory licensing, the prospect of rent controls remains a major deterrent.

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