Professional landlords plan to expand despite Renters’ Rights Act fears

Corporate landlords appear to remain confident despite fears about the Renters’ Rights Act, new research suggests.

It is six months since the new rental reforms were introduced and while there have been reports of individual landlords wanting to exit, professionals seem undeterred, according to LRG’s latest findings.

The research was based on LRG’s Corporate Lettings division’s client base, which comprises landlords with a typical portfolio size of 50-plus properties.

It claimed that 82% are actively planning to scale their businesses, with one example aiming to increase its portfolio from 500 to 10,000 in the coming years.

Both rent levels and arrears have improved and we’ve not seen the uptick in tenant turnover many feared when tenancies became periodic.”

The research also found that arrears of more than 30 days have fallen compared with the six months before the Act, decreasing from an average of 3.3% to 2.7%. Annual rent rises have also increased slightly to 6%, up from 5.7% previously.

Aiming high

Adam Hills (pictured), Client Services Director at LRG Living Markets, says: “There was some concern about the Renters’ Rights Act prior to its implementation, but thus far landlords at the larger end of the spectrum seem to have been relatively unaffected.

“Both rent levels and arrears have improved and we’ve not seen the uptick in tenant turnover many feared when tenancies became periodic from day one. Initially, many believed that the end of fixed terms could lead to tenants moving in and out within short periods of time.

“Although it’s still too early for us to report definitively on any changes in annual average tenancy lengths, so far we’ve seen no evidence of this happening across our portfolio of landlords.

“With the transition having been smoother than expected and landlords owning property in company structures emerging unscathed from the recent Budget, it’s unsurprising that many corporate investors are looking to expand further.”

Larger scale projects

However, Hills said that some professional landlords are aiming much higher.

He adds: “We’re seeing many investors looking for larger-scale opportunities such as entire freehold blocks, commercial buildings ripe for residential conversion and larger portfolios owned by retiring or exiting landlords, as opposed to focusing on single property purchases.

“In the past, many considered yields of 8%-plus to be acceptable, but we’ve seen this rise to 10%-plus over the past year as astute professional landlords build in the current market uncertainty and account for any future impact of the changes to rental legislation.”