BTL landlords continue to flee the market - London Wallet

Landlords continue to exit the private rented sector with the sale of another 151,000 buy-to-let and holiday homes in the year to April 5 2023, according to UHY Hacker Young.

The national accountancy group pointed to the fact that buy-to-let properties have become markedly less profitable for many landlords in recent years in light of tax and legislative changes, as well as higher mortgage rates.

Neela Chauhan, tax partner at UHY Hacker Young, said: “The increase in interest rates has hit UK landlords incredibly hard. Many are questioning whether they can continue in the market – and some have already quit altogether.

“The increase in mortgage costs is not the only issue for landlords – they have been hit hard from all sides in recent years. Tax changes have made it far tougher for buy-to-let investors. Ultimately, it’s renters that will feel the pain from that as the number of properties available falls.”

According to HMRC, £1.8bn in capital gains tax was paid on sales of buy to let properties from April 6 2022 to April 5 2023.

The number of sales of buy-to-let properties has increased significantly since the pandemic, from 98,000 in 2020/2021 to 153,000 in 2021/2022.

More than a third of buy-to-let landlords plan to sell property in the next 12 months, although one in ten of them will sell all of their property with the main reason being that property investment is no longer financially viable, separate data from Landbay shows.

A survey by the lending platform found that 34% of landlords are thinking of selling but only one in ten of them will sell all of their property. However, 90% of buy-to-let investors looking to sell said they only want to sell some of their properties, with 15% of those also intending to buy as they are restructuring their portfolios.

There is a mixed picture in the regions with half of landlords in London saying they want to sell some property. In the South of England, 29% of landlords intend to sell, in the North it is 25% and in the Midlands 22%.

The main reason for selling, cited by 65% of landlords, is rising interest rates, up from 45% a year ago. Meanwhile, 30% said the rent is not covering their mortgage costs compared to 22% in October 2022. The rise in these percentages is not surprising given that Bank of England base rate was 2.25% a year ago and is now 5.25%.

Landlord taxation is also a reason to dispose of property for 40% of respondents and 25% pointed to the lowering of Capital Gains Tax.

Rob Stanton, business development director at Landbay, said: “Our survey found that one in three landlords are thinking of selling some of their property but not all of it. They intend to stay in the market but are trimming their portfolios and some are reorganising as they both buy and sell property. Higher costs are typically why landlords want to sell, not just interest rates but taxation is also an issue for some.

“On the positive side, two thirds of landlords have no intention of selling and 36% of those are looking to buy property. The market is changing and landlords who see opportunities are taking them while others are rethinking their strategy.”