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The Buy to Let Market: The Landlord's View

The Buy to Let Market: The Landlord's View

The Mortgage Works latest Landlord Panel report reveals the current buy to let market outlook as perceived by landlords. Read on to discover the average portfolio size, rental incomes, what landlords plan to do next and their confidence in the market.

While this data looks retrospectively at the end of 2021, it helps landlords relate their circumstances and experiences to the broader buy to let investor community, and gives a good indication of where the market is headed. Looking at the market trends also helps inform landlords of ways to protect and maximise the profits of their property investments. The report for Q4 2021 draws to close a year of ups and downs for the private rental sector and comes at an interesting time. With inflation on an uphill climb and interest rates beginning to increase to remain affordable for lenders, the report reveals landlord plans for the new year.

Portfolios 

The typical landlord has, on average, 6.9 properties in their portfolio (unchanged from Q3 2021), and an average rental yield of 6% (previously 5.9%). While the number of landlords with at least one buy to let mortgage increased 5% from the previous quarter to 67%, the average number of buy to let loans decreased by 0.7 to 4.5. This suggests that some landlords consolidated debts or capital raised against equity rich properties.

Purchase and Sales Intentions 

  • 24% of landlords are likely to sell a property in the next 12 months, a 5% increase since Q3.
  • 14% of landlords plan to purchase a property in the next 12 months, down 5% since Q3.
  • 64% plan to use a Buy to Let mortgage to fund their next purchase.
  • 52% plan to purchase their next Buy to Let property in a limited company.
  • 33% of buy to let owners intend to remortgage in the next 12 months.

Landlord Confidence 

Despite the fact that more landlords are looking to sell in the next 12 months and the difficulties faced in 2021, confidence remains strong. Optimism amongst landlords for ‘Own Letting Business’ is still in line with the five-year high trajectory it’s following, at 47%. This confidence likely comes from continued growth in rental income.

Rental Income

The average gross rental income achieved by landlords was £59,000, a £2,000 increase on Q3 and £4,000 higher than achieved in the same quarter in 2020. Similarly, the average annual rental income generated per property has also increased, up £408 since Q3, to a total of £8,550, representing a 5% increase.

The trend of increasing rents looks to continue, with 39% of landlords planning to increase their rents in the next six months. 42% report increasing their rents in the last 12 months, which has risen by nine points since Q3. With the upcoming EPC regulation changes and rising mortgage interest rates, many landlords expect to pass on at least some of the expenses to their tenants, which could influence the Q4 2021 and Q1 2022 data.

Looking at this rental data on a regional scale, eight of the eleven standard regions achieved, on average, a gross rental income above the national average of £59,000. The region that achieved the highest income was Yorkshire and the Humber, with an average of £77,000. Yorkshire and the Humber also boast the largest average portfolio size of 11.8, almost twice the national average of 6.9 properties. The three regions that fall just below the national average for gross rental income are the Northeast, the Northwest, and Wales. Wales comes in lowest at £47,000, a £12,000 difference.

Crucially, the results from this data support the sentiment shared in Savills expert predictions, which expect rents will rise 22.2% by the end of 2026. Increases of this size indicate a strong market, with continued demand from tenants and plenty of opportunity for investors.

Our expert brokers can help assess your property portfolio and secure a mortgage that works for you. Get in touch today on 0345 345 6788 or email me at robg@mortgagesforbusiness.co.uk.

NB: ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE