Corporate landlords have yet to feel any significant negative impact from the Renters’ Rights Act after six months in force, according to analysis of data from LRG’s Living Markets division.
Across the Corporate Lettings division’s client base, which comprises landlords with typical portfolios of 50-plus properties, arrears of more than 30 days fell from an average of 3.3% in the six months before the Act to 2.7%. Annual rent rises also edged up to 6.0%, from 5.7%.
“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,” said Adam Hills, client services director at LRG Living Markets (pictured).
“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.
“Some 82% of our clients are actively planning to scale their businesses, with one aiming to increase its portfolio from 500 to 10,000 in the coming years.”
Corporate landlords and the shift to larger portfolios
The 82% figure aligns with research from Handelsbanken earlier this year, which found that 84% of professional investors were looking to grow their portfolios, up from 54% the previous year.
Some of the expansion among larger landlords comes from investors buying properties from smaller landlords leaving the market. Research from the Deposit Protection Service in March pointed to continued consolidation of the private rented sector, with the share of landlords owning one to two properties falling from 57% to 50%, while the share owning 11-plus rose from 5% to 8%.
Some professional landlords are aiming much higher. “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,” he said.
Investors across the board have also become more discerning about yields. “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,” he added.
