What makes London's landlords different from the rest of the country - CML

Posted On: 
15th February 2017

With the capital having a higher proportion of rented properties than any other English region, the Council of Mortgage Lenders investigate the characteristics of London's landlords.

28% of dwellings in London are privately rented, higher than any other English region reports the 2014/15 English Housing Survey.
Credit: 
PA Images

Historically, the private rented sector has always played a significant role in London’s varied housing landscape. According to the 2014/15 English Housing Survey, 28% of dwellings in London are privately rented – with the capital having a higher proportion of privately renting tenants than any other English region. In the borough of Newham, the tenure profile has rapidly evolved, with the share of dwellings in the private rented sector jumping from 23% in 2009 to 45% in 2016.  

For our recent research report, The profile of UK private landlords, we commissioned a survey across the UK, probing landlords on what type of properties they own, what motivates them, how they perceive their role, and how they plan to tackle challenges over the next five years.

Our survey identified 325 landlords who let property in London. We know this is just a tiny fraction of the total number of landlords in the capital. Nevertheless, the findings from our survey offer some insight into how landlords in the capital compare to those in other parts of the UK.

Income and employment

Compared to the rest of the UK, landlords with properties in London have higher disposable incomes, are more likely to be full-time workers, and typically become landlords at a younger age:

  • In London, about 50% of landlords report at least £1,000 of monthly disposable income while, outside the capital, only one-third report this level of income.

  • London landlords are 27% more likely to be in full-time employment, and 37% less likely to be retired than landlords in the rest of the country.

  • In London, landlords are about 25% less likely to start out as an “accidental” landlord (that is, a landlord who has inherited rental property or who is letting a dwelling because it cannot be sold, rather than through choice). They are also about 50% more likely to become a landlord after moving in with a partner who also owns their own home.

  • The average age of first-time landlords in London is 42, compared to 47 outside the capital.

Types of property and tenancies

When it comes to types of property owned, London landlords are more likely to let out flats and less likely to be letting houses.

  • In London, 79% of landlords own flats to let, while 47% have houses of some type (including bungalows). In the rest of the country, just 40% of landlords rent flats, while 84% rent houses.

  • The distribution of property ownership among landlords in London is similar to the rest of the UK. Some 60% of those in London own a single property, while a further 20% own two properties – mirroring the distribution in the rest of the UK. Likewise, about 10% of landlords in London own five or more properties, similar to the rest of the UK.

  • Landlords in the capital are just as likely as those elsewhere to offer tenancies of more than 12 months. Almost 60% of UK landlords indicated that they would offer tenancies of longer than a year, with little variation across regions.

Landlords and finance

Landlords in London are more likely to have purchased with a mortgage and to say they understand the impact of forthcoming tax changes affecting the sector.

  • In our survey, about 15% of London landlords purchased at least one rental property with cash. This rises to 23% outside of London.

  • Almost half of landlords in London had a buy-to-let mortgage on at least one rental property, compared to 35% outside London. This ties into the demographic profile of London landlords, as they tend to have higher disposable incomes and are more likely to be employed.

  • London landlords are marginally better informed of tax changes that will affect the private rented sector. This may reflect the higher incomes and wider prevalence of buy-to-let borrowing in London – particularly as those landlords would be most affected by proposals to reduce the amount of mortgage interest that can be deducted against tax.

Managing the business

The use of letting agents is more common in London, but London landlords are less likely to opt for full management through the agent.

  • Some 70% of London landlords employ an agent in some capacity, with about 40% of these contracting the agent to manage all aspects of the business, including finding a tenant, collecting rent, and maintaining the property. Outside London, only 60% use an agent, although about two-thirds of these opt for full management through the agency.

  • Using a limited company structure is still fairly uncommon, both in and out of London. Only 6.2% of landlords in the capital are incorporated (or planning to become so), versus 2.8% outside London.

Future prospects

  • Like landlords elsewhere, about three-quarters of London landlords don’t plan to change the number of units in their portfolio size over the next five years. However, of those who do plan to change the size of their portfolio, London landlords were more likely to plan to buy more properties (13%) than sell properties (9%).

  • Outside London, 8% plan to expand their portfolio, while 15% hope to reduce it. However, our survey was not able to capture whether landlords would continue to expand within their present regions, or move further afield. 

We found that, in many ways, landlords with property in London were very similar to landlords in the rest of the UK. But the results of this survey suggest that London landlords tend to make different decisions about financing, managing and expanding their properties. With a relatively small sample, it is difficult to say with certainty what is driving this.

The findings that emerge from this snapshot of London landlords add to the series of surveys we have published about landlord characteristics, across the UK as a whole, as well as in the capital. And one thing is certain – with nearly nine million residents, London has a diverse rental market in which a variety of management approaches can operate.