The rental market could be on the verge of seeing a boost from an unlikely source. There has been much commentary on how homeowners are ending up “stuck” with assets they can’t sell. Whether they inherit a property, or struggle to sell their existing home as they try to move, many people are being forced into becoming accidental landlords.
Recent data from the government’s English Private Landlords Survey revealed only 53% of landlords bought their first property specifically to rent it out. Many end up becoming landlords due to a lack of external options and with the Renters’ Rights Bill and Autumn Budget looming, their numbers are likely to rise.
This is often presented as a negative. But what could end up being missed is that as people become accidental landlords, they may realise it’s hugely beneficial to be involved in this market. The rental scene is facing challenges, but it is still proving hugely profitable for those willing to find a way forward.
Rents in the UK are on the up. Average monthly rents jumped to £1,410 in England in September according to the ONS, a 5.5% year-on-year increase. In Wales, they rose by 7.1% to hit £815.
Granted, these rises may not mean much to landlords who are swamped with higher costs and legislative challenges. But the reality is that many landlords are generating healthy incomes from their assets. The average gross rental yield in the UK rose to 7.26% in Q2 according to UK Finance, up from 6.9% a year prior. Furthermore, the number of BTL mortgages in arrears greater than 2.5% of the balance fell to 11,270, down 560 from Q1.
As accidental landlords get their bearings and realise that they may able to generate healthy returns from the BTL market, they may get a taste for it. Perhaps, we’ll see newbie landlords attempt to become experienced property investors.
The timing could work out well too. Many existing landlords are set to sell up over the coming months as new legislation comes into play. A wave of rental properties could be bought up by enthusiastic new players.
But these new players will need support. Property investors without a lot of experience are unlikely to receive much support from high street lenders. As such, specialist lenders will need to step forward and be there for the next generation of landlords.
Fortunately, the bespoke industry is primed for this. Our products are there for first-time buyers, young borrowers, and inexperienced landlords. So long as there’s a clear market need for our services, we will find a way forward.