Two-Thirds of Landlords Plan Property Sales Amidst Regulatory Pressure
A significant majority of buy-to-let investors intend to sell properties within three years, driven by increasing taxes and regulations, according to a new survey.
Two out of three landlords are planning to sell at least one of their properties in the next three years, a survey by landlord consultancy Property118 indicates. This trend is fueled by a combination of increased taxes, evolving regulations, and rising mortgage rates that have made the buy-to-let sector increasingly challenging.
Investors have faced years of mounting costs, including higher mortgage rates and new legislation. The Renters' Rights Act, introduced in May, is cited as a recent factor that has made it more difficult for landlords to evict tenants and adjust rental prices. This regulatory environment has increased the perceived risk and administrative burden associated with being a landlord.
Compounding these challenges, falling house prices in some areas mean that landlords considering selling may face a loss on their investments. Data from HMRC, analyzed by Bowmore Wealth Group, shows that buy-to-let investors lost an estimated £1.15 billion in the 2024-25 tax year on residential property sales. This represents a one-third increase from the £870 million in losses reported in the 2023-24 tax year.
"Successive Governments have turned buy-to-let into a part-time compliance job with a full-time tax bill," said Harry Goodliffe, of broker HTG Mortgages. He anticipates a gradual sale of rental homes as tenancies conclude, rather than an immediate flood of properties onto the market.
House prices have experienced stagnant growth, with the Lloyds House Price Index showing no change in the average property value compared to a year prior in September. Property values in London saw a 2.2 percent decrease, while the South East experienced a 2.1 percent decline.
David Floyd of Bowmore Wealth Group noted that investors are comparing the yields of buy-to-let properties with growth in global stock markets and high yields on UK Government bonds, questioning the current investment strategy. He added that the Renters' Rights Act may have prompted some investors to exit the market, even if it entails financial losses.
However, the potential influx of properties could present opportunities for portfolio landlords looking to acquire new assets. Mark Alexander, founder of Property 118, suggests that selling a poorly performing property can be a strategic move to strengthen an overall investment portfolio, provided it is part of a well-considered plan that accounts for all associated costs and future implications.