A Coventry property expert says landlords are facing selling their properties as the buy-to-let-market declines. Jag Chaggar says the cause is due to less homes available because owners are selling to offset losses from tax changes and rent increases.
Across the UK, there has been a widespread landlord sell-off, particularly in Scotland. Data from luxury estate agent Hamptons revealed that landlords were on track to have bought the fewest homes since 2010. This correlates with the report from Rightmove which states that new seller asking prices fell by 1.7% of £6,088, last month to an average of £362,143.
In the UK, the percentage of dwellings sold by landlords decreased from 15.7% in 2022 to 14% this year. Around 11.2% of all residences listed for sale this year have been purchased by investors, down from 15.7% in 2015.
According to Hamptons, since 2016, individual landlords would have sold 294,300 more homes than they had purchased, more than the combined sum of all the homes in Manchester and Cornwall. Jag says the appeal of buy-to-let investments have ‘diminished’ due to changes in home emission rules, higher mortgage costs and altered taxation of buy-to-let incomes,
On the other hand, landlord-owned properties must have an energy performance certificate (EPC) rating of C or above from 2028. But some landlords have already decided to sell up because it is estimated that thousands of homes will need costly improvements to comply.
At Tutis Estates, Jag anticipates a 25% increase in rent by the end of 2026 due to a shortage of available properties in Coventry. The blow for landlords is being lessened by strong rental growth, but are still depending on their equity and cash reserves to get by. Rather than selling all their properties, portfolio investors are juggling their holdings by selling one or two to lower their mortgage debt on the remaining properties in their portfolio.
However, according to Hampton, 10% to 20% of landlords who were recently forced to remortgage are now losing money on their investment. Throughout the first 10 months of 2023, there were 43% fewer rental properties available than during the same time in 2015.
The true supply shortage in the private rental market has resulted from investor’s lack of desire to purchase new buy-to-lets over the past few years, in addition to landlords selling up. This has caused fewer houses available for rent, which is causing the rental market to grow, Jag adds.
Rightmove reported recently that as Christmas draws near, sellers “continue to adopt more pricing realism to attract a buyer”, with new seller asking prices reduced by 1.7% across the UK in November. According to a recent prediction by Lloyds Bank, house prices in the UK will continue to decline through this year and into next, with no signs of a recovery until 2025.
Head of UK residential research at Knight Frank, Tom Bill, said: “The story of this slowdown is a double-digit fall in transactions rather than a dramatic price correction, which has been kept in check by weak supply.
“Sapping sentiment is higher interest rates, the possibility of a general election, foreign conflicts, and the uncertainty surrounding the peak of bank rates. We anticipate that as the economic environment stabilises next year, prices and sales volumes will peak.” he added.