Significant structural changes taking place inside PRS, according to new DPS survey
11 December 2023
Separate DPS survey of letting agents clients reveals almost 30% believe larger landlords are buying properties off those with more modest portfolios
A survey of more than 1,000 landlord clients of The Deposit Protection Service (The DPS) has revealed significant structural changes taking place inside the private rental sector (PRS).
The survey by the UK’s largest protector of deposits shows that double the proportion of landlords with two or fewer properties are planning to sell up and leave the rental market, compared with those who have portfolios comprising more than 10 properties (24.47% compared with 12.16%).
The research also shows how almost three times the proportion of landlords with portfolios larger than 10 properties intend to buy more compared with those who own one or two (13.51% compared with 5.63%).
The survey also reveals that, of those intending to leave the market, more than twice the proportion of landlords who are not set up as a business for the purposes of renting intend to sell all of their properties and leave the PRS altogether compared to those operating a limited company (21.72% compared with 10.34%).
Separate research by the organisation also suggests that some larger landlords are buying up the properties of those with smaller portfolios.
Matt Trevett, Managing Director at The DPS, said: “Whilst the volumes of tenancies we protect remains unchanged, the data suggest that landlords operating on a larger scale are showing a stronger commitment to the PRS compared with those with fewer properties.
“Landlords with a higher number of properties typically choose to place their businesses inside limited companies in order to better manage their costs, which are impacted by high interest rates and tax changes.
“We are also seeing different intentions emerge among landlords who use companies compared with those who don’t, suggesting that how a landlord chooses to organise their business has a significant impact on their attitude towards the market.”
Paul Fryers, Managing Director at Zephyr Homeloans, a specialist BTL lender, also owned by the Computershare group, said: “Landlords using a company for their business operations to control costs is fast becoming the norm and such landlords comprise the vast majority of our customers.
“Landlords who last summer were paying around 4.38% on a typical five-year variable buy-to-let mortgage are now typically paying around 6.22% - an extra three hundred pounds a month on a £200,000 loan.
“We would encourage brokers to work closely with their landlord customers to thoroughly investigate the most effective ownership options for their existing portfolio or additional property investments.”
Buying intentions
The survey also revealed that six times the proportion of landlords who operate a limited company intend to buy more property compared to those who are not set up as a business for the purpose of renting (24.14% compared to 4.64%).
Only 8% of landlords operating as sole traders intend to buy more rental properties; 21.72% of them intend to sell all their properties and leave the rental market altogether, the DPS added.
Accidental landlords
The survey also reveals that twice the proportion of landlords renting out property that used to be their own address intend to sell all their properties and leave the rental
market altogether compared to landlords that bought their property to rent it out (35.80% versus 18.08%).
By contrast more than twice the proportion of landlords who bought property to rent it
out intend to buy more property compared to those renting out property that used to
be their own address (9.12% compared to 4.32%), the organisation added.
Letting agent data
A separate DPS survey of letting agents’ clients reveals that 28% believe that larger landlords are more frequently purchasing properties from those with more modest portfolios.
The second study also reveals that 36% believe that more landlords are now setting up as a business.
