"At some point there is going to need to be an acceptance of the importance of the PRS, and of what landlords are doing to meet the UK’s housing need."
But there is also compelling evidence to be found within our industry data and it can tell us much about what is driving the market and what is holding it back.
On that point, I looked recently at the latest Propertymark PRS report and, at any other time, you might believe this presented a picture which should be fuelling a huge amount of landlord activity, particularly in terms of adding properties to portfolios.
As a headline, how does this grab you? In April 2022, 98 new applicants for PRS properties were registered at every single Propertymark member branch. Conversely, those very same branches had, on average, only nine properties empty and freely available.
Now this clear demand/supply imbalance would ordinarily result in both existing and new landlords reviewing their options, understanding that tenant demand was incredibly strong in many regions and meant they could look to bring new properties to market in order to satisfy that demand.
And, of course, for those landlords that can, this is exactly what they are doing. It’s why Fleet Mortgages is seeing such a strong remortgage market at present amongst existing landlord borrowers as they seek to utilise their existing equity in order to put down deposits on new properties. It’s why we have also seen far more purchase activity than many would have anticipated particularly after the end of the stamp duty holiday.
However, as you will know, there are some incredibly large obstacles in the way to supplying the PRS with the properties it so clearly needs, and many of them have been in place for a number of years with, it looks likely, more to follow.
Firstly, there is good news here. As advisers you will have landlord clients in a position to act. As mentioned, we’re all acutely aware of what house prices have done across most of the UK particularly in the last two years, and there is plenty of mortgage lender appetite to support those landlords who want to use this equity growth.
However, the supply of property for purchase is running at similar levels to the supply of property available for rent. It’s low and there is significant demand from other purchasers including first-timer buyers and those seeking to move home. I have no argument with that – it is the market at work.
I understand that different types of borrowers will be in competition for the properties available, but of course landlords do have other considerations to make here.
Firstly, even if they have the deposit, is there a property suitable to buy. If there is, then they have to factor in the 3% stamp duty surcharge cost plus they have to consider all other costs, as well as the reduced amount of relief now available, perhaps the cost of running a limited company in which to house the property, plus such things as future EPC requirements and all the other necessary rules and responsibilities that come with being a landlord.
And, again, I understand the reasoning behind why these were put in place, but I don’t understand why more regulatory and financial pressures are being placed on landlords at exactly the point when – as the Propertymark stats reveal – there is an overwhelming need for more PRS properties, not less.
Go back 10 years and the prevailing mentality back then. Perhaps those who made the rules were right? Perhaps landlords did have the upper hand on those others seeking to buy property and perhaps it was right to rebalance the market slightly? However, was the intention to get to the point we are right now? To have, on average, nine PRS properties to share around hundreds of people looking for homes? I very much doubt it.
In the quest to turn everyone into a homeowner it has been forgotten that not everyone wants to do this, or can currently do this, or is in a position to do this. And these many millions of people still need somewhere to live. And generally that place to live is within the PRS, where landlord participants have (and continue) to be placed under all kinds of burdens that either make them want to sell up, or make them unable to bring supply to market.
This is undoubtedly a curate’s egg of a sector. But at some point there is going to need to be an acceptance of the importance of the PRS, and of what landlords are doing to meet the UK’s housing need.
That acceptance should set a line in the sand about what landlords are able to keep on doing under such continued pressure. And, due to the resilience of the sector, I have no doubt it will be able to step up to the plate again and hit a home run. Let’s therefore pursue policies that encourage, otherwise we risk sending everyone out of the game.
