In a remarkable disconnect, landlords display pessimism amid buoyant rental conditions in the private rented sector.
- A vast majority of landlords perceive the Labour Government as detrimental to their interests, with 90% expressing concerns.
- Tax implications, such as Capital Gains Tax changes, pose significant worries for 85% of landlords.
- Despite strong tenant demand, landlords show reluctance towards portfolio expansion, with only 6% planning to purchase more properties in 2025.
- Proposals such as rent caps and mandatory licensing contribute to the prevailing discontent among landlords.
Landlords in the UK are facing a unique situation where their outlook remains grim, despite thriving conditions in the private rented sector (PRS). According to Pegasus Insight, over 90% of landlords view the Labour Government as unfavourable for their interests. This stems from apprehensions over potential tax increases, anti-landlord policies, and losing control over property management.
Close to 85% of landlords have voiced concern about possible changes to Capital Gains Tax (CGT) which might impact their investment strategies. Measures like rent caps and the removal of Section 21 no-fault evictions compound these worries, with 79% and 73% respectively highlighting them as issues. There is also unease regarding mandatory landlord licensing (54%) and the imposition of new energy performance standards to meet EPC Band C requirements (51%).
The spectre of significant CGT changes has prompted 39% of landlords to consider halting investments, a figure that increases to 48% among those with larger portfolios of four or more properties. Alarmingly, nearly 20% are contemplating a complete exit from the market, while 16% may sell some properties and an additional 21% are considering this path. Financial pressures on tenants could also increase, as 26% of landlords might raise rents in response to potential CGT modifications.
Landlords appear cautious about expanding their portfolios, with only 6% intending to grow their property holdings in 2025, while 41% are planning to divest. This reticence is particularly evident among those with buy-to-let mortgages, where 46% are more likely to sell compared to 34% of those owning property outright. Landlords managing 20 or more units show even greater concern, with 59% planning property sales in reaction to future rental reforms.
Despite these uncertainties, tenant demand remains robust, with 79% of landlords reporting strong interest and rental yields reaching a decade-high of 6.5%. Notably, 70% of landlords currently enjoy modest profits, and a further 17% report significant profits. As Mark Long, the founder of Pegasus Insight, notes, “This research reveals deep-seated concern over the government’s stance and potential actions toward landlords.” Long emphasises that while the sector is performing well, the government needs to consider the potential negative impacts of heavy CGT burdens on landlords and the potential exacerbation of the supply-demand imbalance in the PRS.
Landlord sentiment remains cautious despite a thriving rental market, highlighting the impact of government policies.
