Lack of finance causes landlords to lose confidence

Nia Williams

November 9, 2010

The most recent findings from the Upad Landlord Confidence Index show that just 54% of landlords say they are more confident in the rental sector than they were last month, down from 57% in October.

Around 348 private residential landlords responded to the question, “Are you more or less confident in the rental market than last month?” Many of those who said they were less confident cited finance as an issue. One landlord commented at length: “All 55 houses are on standard variable rate. I can’t remortgage because I’ve only got about 15% equity across the portfolio, now banks want 25%. If interest rates go up 1% I will find it hard. A 2% base rate will bankrupt me, forcing me to default on a £6 million portfolio. I wonder how many landlords are in this situation.”

Other comments from those who said they felt less confident included:

• “Since the withdrawal of Birmingham Midshires from larger portfolios, financing is very difficult.”

• “I bought at the peak time and my property has depreciated 10% which was my deposit and I have not been able to make anything other than interest payments due to my own employment situation. It is not getting any better nor is it going to – it is going to get much worse.”

Others saw the fall in house prices as offering an opportunity for those investors who do still have available cash, with one landlord who said he felt more confident, commenting: “Still some dropping of sale prices over coming months, but lots of investment opportunities for anyone with a bit of initiative and access to funds.”

Of landlords who said they felt more confident, most cited tenant demand as the reason. Comments included:

• “There seems to be a good demand for quality properties as people are more reluctant to buy their own homes now.”

• “Perhaps because I’m in the south east, I find that there is no shortage of applicants. The capping of housing benefit will, I believe, only increase the pressure on the rentable properties, further increasing rents.”

• “London market is booming – allowing easy replacement of any housing benefit tenant, and a small increase in rents!”

Commenting, James Davis, Upad’s CEO and a landlord himself, said: “This is a very worrying time for landlords. While tenant demand is up and falling property prices ought to offer opportunity for investment, the wider economic climate means that many landlords feel they are on a knife edge.

“The private rented sector is being left by the government to pick up many of the pieces from the recent cuts, but not given any support to do so.

“The nationalised banks must be encouraged to free up finance so that landlords can play their crucial role in supporting those who, for whatever reason, are unable to house themselves.”

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