Are current market challenges too much for landlords to handle?
Despite earlier reports of a mass exodus from the rental market, private landlords accounted for only 14% of all sellers in the UK so far this year, down from 15.7% in 2022.
Research by residential estate agent Hamptons has revealed that even with rising running costs and higher mortgage rates eroding profits, landlords sold fewer homes this year – 103,130 homes between January and September, some 39,270 or 28% fewer than during the same period last year.
Excluding 2020 – at the height of COVID-19 pandemic restrictions - this year’s first nine months posted the lowest number of homes sold by buy-to-let investors during the first three quarters of a year in a decade.
The latest Hamptons Month Lettings Index estimates that private landlords are set to sell 139,820 buy-to-lets in 2023, around 53,240 fewer than in 2022 and 61,810 less than in 2021 when landlord sales peaked.
Earlier this year, Hamptons said that close to half a million landlords were expected to exit the buy-to-let sector over the next five years.
Despite the fall in the number of those selling their buy-to-lets, landlords are still selling more homes than they’re buying, with landlords only buying 11.2% of all homes sold across Great Britain.
Rental growth shows little sign of slowing down
The Hamptons research also showed that rents grew by 11.7% year-on-year across Great Britain in October, the same annual pace as in September.
As a result, the average rent on a newly let property rose to £1,345 per calendar month in October, up £141 per month compared to the same month last year – the third consecutive month of double-digit increases and the sixth double-digit hike recorded during the last 12 months.
According to Hamptons, rents increased in every region, with London and Scotland leading the way.
In Outer London, rents rose by 14.8% across the capital, costing the average tenant an additional £312 per month or £3,744 a year if they were to move into a new home. In Scotland, where the landlord sell-off accelerated this year, rents went up by 12.9% year-on-year.
“There’s a strong argument that landlords have been hit harder by higher rates than anyone else,” commented Aneisha Beveridge (pictured), head of research at Hamptons. “However, despite these challenges, most landlords are sticking it out.
“Strong rental growth is softening the blow, but they’re also drawing on their equity and cash reserves to see them through. Portfolio investors – who tend to be more highly leveraged – are juggling their assets by selling one or two properties to reduce their mortgage debt on the rest of their portfolio, rather than selling up entirely.”
Beveridge stressed that the real supply issue facing the private rented sector has not just been caused by landlords selling up, but also because there has been little appetite among investors to purchase new buy-to-lets over the last few years.
“This has reduced the number of homes available to rent which is fuelling rental growth,” she said. “After adding wider inflationary pressures on top, we think rents will have risen by 25% by the end of 2026.”
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