A survey carried out by the Residential Landlord’s Association (RLA) has revealed that more than one in four landlords will sell at least one of their properties over the next year. This exodus from the buy-to-let sector is thought to be fuelled by rising property prices coupled with unfavourable legislation, encouraging landlords to cash in on their gains.
The survey follows the Government’s own English Private Landlord (EPL) Survey released earlier this year, which produced different results. The EPL Survey suggested that Landlords representing 18% of tenancies planned to decrease their property portfolio; whilst Landlords representing 16% of tenancies planned to purchase more. By contrast, the RLA survey found that 26% of landlords planned to sell at least one property, while just 14% planned to buy at least one more.
The RLA is concerned that as private landlords sell off their portfolios, less rental properties will be available and rents are likely to rise. RICS warned previously that a lack of rental properties would likely cause an increase in rents of 15%+ over the coming 5 years. Given that the demand for properties in the private rental sector is increasing, just a small demand in stock could result in increased rents and difficulty finding a property.
Currently there are 1.5 million landlords in Britain, with 3.4 million rental properties. Around one in five households rent privately, with many families taking this type of accommodation. According to mortgage brokers, buying a property is often unrealistic for this group. Social housing is also not an option, with lengthy waiting lists resulting from demand far exceeding supply.
Many landlords feel they have been left with little choice but to sell, after the Government has launched one attack after another on their profits. Tax relief on mortgage interest payments was gradually scaled back from April 2017 and from April 2020 it will only be possible to claim at basic rate.
Landlords have also lost the wear and tear allowance in favour of a more restrictive system and in addition, will be concerned about the Government’s recent plans to strengthen tenants’ rights in relation to eviction.
Whilst the raft of unfavourable measures has made the marketplace less lucrative, the growing house prices have provided a further incentive for landlords to make an exit. According to estate agent Hamptons, Landlords who sold a property in England and Wales in 2018 made an average of almost £80,000 more than their purchase price, before tax deductions. Predictably, Landlords in the Capital made the greatest gains.