Landlord Confidence Index (LCI) no.11: 2021 Q3
Page 1 - additional commentary
The NRLA's Landlord Confidence Index (LCI) provides a barometer of landlord confidence and an insight into the market factors and sectoral pressures which determine confidence levels.
Nationally (England & Wales), the headline confidence index stood at -5.1. This is a record national high for confidence, beating the previous high watermark of -8.0 - this figure was achieved in Quarter 2 of this year. 2021 has seen three of the four highest scores for the confidence index, so there has been a clear uptrend.
Even in London, which has lagged other regions of England & Wales throughout 2021, confidence has grown. The change has been most noticeable in Inner London. In Quarter 2, Inner London had the lowest score of all regions. Quarter 3 saw confidence in Inner London rise from -20.0 to -4.5.
One important rider we put on this confidence growth is the reminder that confidence is still negative. More feel less confident than more confident that they can achieve their business goals as a landlord. There was no region where landlords were more, rather than less confident. However, in the South West the LCI was 0.0 - precisely neutral.
Page 2 - additional commentary
Portfolio & rent analysis
Taken as whole the reasons underpinning landlords' buying and selling decisions are unchanged from three months ago. When looking at buyers and sellers there is considerable variation. Those who had sold cited changes in tax & regulation, as well as increased costs as the key reasons for selling property. The fear of not being able to take back possession of property was the single most important regulatory reason why landlords were selling. On tax, the changes in mortgage tax relief continues to bite.
For buyers, their view of the local economy and local property market was a prompt to expand portfolios. "personal family reasons" is as important a driver for buyers as it is for sellers. It may be (and this is not enough evidence to draw firm conclusions) that one motivation for landlords is buying property as a hedge against what some see as uncertain economic times.
One of the key features of the LCI through the latter part of 2020 and 2021 has been the difference in confidence levels between London and the rest of the country. The impact of Brexit, Covid-19 and the flight from the capital - as well as the Mayor's hints at a move towards rent controls - have all had a negative effect on the confidence of landlords who let property in the UK's largest city.
This quarter has seen that gap in confidence narrow. There are still differences between London landlords and elsewhere: 41% of London-based landlords looking for new tenants reported an increase in demand compared to an average of 57% outside London. This is also a significant improvement on the responses we have seen in recent surveys.
The intention to buy and sell
After increasing for the last five consecutive quarters, the proportion of landlords planning to buy has fallen - from 22% planning to buy in the next twelve months in Quarter 2 to 19% in Quarter 3. Quarter 2 saw record levels of buyers. The proportion planning to sell has not fallen - remaining unchanged from Quarter 2. The proportion planning to sell remains considerably below the levels in the equivalent quarter in 2019 (34%) or last year (30%).