A significant number of landlords are leaving the buy-to-let market, driven by increased taxes and stricter regulations, which is creating opportunities for many first-time buyers to enter the property market after years of being priced out. Falling prices for flats, a consequence of former rental properties flooding the market, are making homes that were previously unaffordable now within reach for aspiring owners.
The Renters’ Rights Act, introduced by the Labour party, is a key factor influencing landlords' decisions. This legislation provides enhanced protections for tenants, with more stringent rules concerning rent collection and evictions. A specific provision, the ‘ground 1A’ notice, allows landlords to evict tenants to sell their properties, but imposes a 12-month ban on re-letting the property if a sale is not completed. This can leave landlords with an empty property and no income to cover ongoing costs for up to a year.
Estate agents report that landlords seeking a quick sale are more open to reasonable offers. First-time buyers are particularly attractive to sellers because they are typically free of a property chain, offering more certainty and potentially speeding up the transaction process. According to Savills, over a quarter of a million former buy-to-let homes were put up for sale in the year leading up to March, marking a 9% increase from the previous year. Flats, which are commonly sought by first-time buyers in major cities, constituted a majority of these rental homes. Hamptons indicates that flats continue to be disproportionately affected by landlord sales, leading to price reductions compared to other property types.
This market shift has allowed individuals like Helen Tinlin and her partner Kieran to purchase their first home. After being informed they would have to leave their rental property in Herne Hill, south east London, they began searching for a home to buy. Tinlin, 29, noted the high cost of renting a garden flat suitable for their dog, with monthly rents ranging from £2,000 to £2,500. She shifted her focus to properties being sold by landlords, anticipating a stronger negotiating position due to the increased supply. The couple successfully purchased a one-bedroom flat for £460,000, which had been listed at £475,000, after a previous buyer withdrew. The landlord also selling another flat in the building allowed the couple to acquire the freehold.
Estate agents have observed an increase in tenants purchasing properties directly from their landlords. This arrangement can be beneficial for both parties, often resulting in a swift and efficient process without the need for property viewings or a lengthy chain. In one instance, a detached four-bedroom house in Reigate was sold to its long-term tenants within six weeks. Selling to existing tenants can be an attractive exit strategy for landlords, as it can eliminate estate agent fees, allow them to continue receiving rent until completion, and provide a chain-free buyer who is already familiar with the property.
In some situations, transactions can be structured as a 'concessionary purchase'. This might occur if a landlord agrees to sell a property below market value. For example, if a property is valued at £200,000 and the landlord sells it to the tenant for £190,000, some lenders may permit the £10,000 difference to act as the tenant's deposit, reducing the need for personal savings. This was a factor for Zoe Power, 40, who purchased her four-bedroom house in Halesworth, Suffolk, from her elderly landlady. Power had been renting the property for ten years at £650 a month. Her landlady decided to sell due to concerns about the new regulations in the Renters’ Rights Act. Power, who runs a lampshade company, found that similar rental properties in the area were advertised for £1,600 per month. The property, valued by estate agents at £260,000, was purchased by Power for £240,000. As the purchase price was under £250,000, she was exempt from stamp duty. Power is in the process of completing the purchase and expressed a mix of apprehension and satisfaction about becoming a homeowner in a property she knows well.