Buy-to-let investors are increasingly negotiating substantial discounts on property purchases, taking advantage of a softening market. Estate agent Hamptons reported that landlords secured an average of 11.3 percent off asking prices in July, a trend driven by a challenging sales environment where some developers are experiencing the worst selling conditions in decades.
In July, landlords represented 14.1 percent of all home purchases, a notable increase from the year-to-date average of 12.4 percent. This rise aligns with historical patterns where experienced investors often increase their activity in slower markets to acquire properties at lower prices from motivated sellers. Seasoned investors, according to Hamptons analyst David Fell, are typically quick to act when market conditions present opportunities.
Fell noted that with homes taking longer to sell and property chains becoming less stable, landlords are using their readily available funds and their position free of a selling chain to gain leverage in price negotiations. In a market where transaction certainty is highly valued, these advantages can be more impactful than in more robust markets with multiple buyer options.
Investor offers at 10 percent below the initial asking price were particularly common in July, representing half of all investor offers. This proportion is the highest seen since April 2020. For cash-buying landlords in England and Wales, the willingness to offer significantly below asking price was even more pronounced, with nearly two-thirds of their offers falling at least 10 percent under the initial price. In contrast, owner-occupiers, including first-time buyers and those moving homes, made lower offers, with only 25 percent and 27 percent, respectively, offering more than 10 percent below the asking price.
Sellers are showing a greater willingness to accept these lower offers. In July, 27 percent of investor offers made at 10 percent or more below the asking price were accepted, a significant increase from 18 percent in July of the previous year. This trend is particularly evident among sellers of leasehold properties, where 41 percent of such discounted offers were accepted. This indicates notable price weakness and reduced demand in the apartment market, with some city center flat owners in areas like Sheffield and Birmingham selling at an average loss of nearly £40,000 over the past 12 months.
The South East of England saw the highest frequency of such opportunistic offers, with 70 percent of investor offers in the region coming in at least 10 percent below the asking price. The South West followed with 60 percent. Accepted deals reflecting these lower offers were more common in the South East, accounting for 54 percent of agreed sales, and 44 percent in the South West. In contrast, London saw a lower acceptance rate of discounted offers, with only 16 percent of deals involving offers 10 percent or more below the asking price being accepted.
Fell observed that sellers who have had their properties on the market for extended periods tend to become more pragmatic, especially those selling flats or properties in southern England. While higher borrowing costs continue to affect investment returns, landlords with substantial cash reserves or minimal debt are finding opportunities to purchase properties at considerably lower prices than in previous years. The upward trend in rental income is also providing a partial offset to increased borrowing expenses for these investors.