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Could Opportunities Arise in 2023 Despite BTL Market Gloom

Interest Rates

Landlord Confidence Was Hit by Uncertainty in the BTL Market Last Year.

After many years of consistent growth, 2022 turned into a year of mounting uncertainty in the buy-to-let (BTL) market. Unsurprisingly, this bleak background affected many BTL landlords’ confidence in the future.

A survey undertaken by a large surveying service & reviewed by Advocate Finance (BTL Mortgage Broker Colchester, Essex) made this very clear. The survey, carried out in September 2022, found that BTL landlords’ optimism for the short-term prospects of their own lettings business had plummeted. Only 27% were feeling positive, down from 45% at the start of the year. Remember too that this survey was undertaken before the disastrous ‘mini-budget’ and subsequent political and economic crisis.

The biggest worry many landlords had in the BTL climate was interest rates. A separate survey carried out by Countrywide Surveying Services indicated that close to half of the landlords felt that interest rate increases were their greatest challenge. With 35% of BTL borrowers intending to re-mortgage in the next 12 months, the anxiety was understandable.

These fears meant that close to a third of all landlords in the survey reviewed by us at Advocate Finance were likely to consider selling a property in the next twelve months. Evidence suggested that it was landlords with smaller holdings who intended to be particularly concerned about the interest rate rises.

In addition, the proportion of landlords feeling positive about Capital Gains and Rental Yields was also on the slide. According to us here at Advocate Finance (BTL mortgage broker Colchester, Essex), the survey found that only around one-third of landlords were upbeat about the prospects of improvement in these areas, down from close to two-thirds when compared with the same period the year before.

There Were Reasons to Be Cheerful Amongst Professional Landlords

Despite the uncertainty which seemed to descend on the BTL market at the end of 2022, it wasn’t all bad news. Whereas some smaller, less committed landlords were tempted to sell up and leave the industry, many professional landlords had a more positive outlook. They were happy to sit things out and maybe even look to expand their portfolios. This more optimistic long-term view was encouraged by several factors.

Most importantly, average rental yields remained high. Landlords with several properties in their portfolio achieved an average yield of 5.8%. This typical return rate seems unlikely to fall in the foreseeable future. Meanwhile, tenant demand continued to outstrip the supply of properties to rent, meaning that the pressure driving up rental prices remained high.

According to us here at Advocate Finance, the survey results backed this up, continuing to report high tenant demand. Newly advertised properties were quickly snapped up. 65% of surveyed landlords said demand had risen in the last three months prior to taking the survey, with more than half of these saying demand had increased significantly. What’s more, this reported increase in tenant demand had a demonstrable effect on rent levels. A survey published in The Guardian, indicated that advertised rental prices had increased by around 20% when compared with a year ago.

Furthermore, the fact that some less committed landlords considered leaving the BTL market due to uncertainty, means that there were likely to be more properties available for those who wish to expand their property portfolios.

Overall Outlook

The current market sentiment is undoubtedly gloomy, with more than twice as many landlords planning to sell a property compared with those intending to buy one.

On the other hand, this was also a period where tenant demand for new properties was very high and likely to remain so, given the long-term housing shortage. That means rental price levels are resilient and likely to continue to increase. Furthermore, the current BTL market uncertainty could mean that more properties are likely to reach the market.

Advisers here at Advocate Finance (BTL Mortgage Broker Colchester, Essex) believe if you have spare capital, the possibility of expanding your property portfolio remains a viable option.

How can Advocate Finance help?

Our professional and experienced Advisers are here to help if you have any uncertainty or if you would like any advice on refinancing/growing your portfolio.

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