In one of our previous blogs, Open Property Group looked at why landlords are selling up. The list of reasons was worryingly exhaustive. Retirement, too much legislation and compliance, rising mortgage costs, problem properties and lack of profit were all cited by the landlords we questioned as part of our wider property ownership survey.
Now, an additional piece of research has uncovered where in the country landlords are most likely to exit the buy-to-let market. The data, published by Cornerstone Tax, found landlords in Brighton (52%) were most likely to consider offloading properties due to rising costs associated with their let.
Landlords in the South Coast city were followed by those in Birmingham (33%), London (37%), Leeds (26%) and Manchester (22%). For comparison, the national average of landlords considering exiting the market was 17%.
Jason Harris-Cohen, the Managing Director at Open Property Group, notes two trends in the figures released by Cornerstone Tax. “Firstly, it’s clear landlords in the South of England are under immense pressure compared to their Northern counterparts. A landlord in Brighton is twice as likely to consider selling up when compared to a landlord in Manchester – a statistic that dovetails with recent research that found buy-to-let investors are increasingly looking North for better prospects.”
Secondly, and perhaps more surprisingly, Jason says the fact that the top five areas where landlords are thinking of exiting the market are all cities rings alarm bells. “City buy-to-lets have long been the jewel in the portfolio crown. There’s always been an excellent supply of tenants, premium rents and a desire to live in the heart of the action.”
“The allure of cities certainly took a hit during the pandemic. I think a wider adoption of hybrid and home working has taken the shine off of being within a short commute of business districts,” says Jason.
“There are other factors at play, which may explain why city landlords are starting to question their future,” says Jason. “Landlords with certain HMOs in London, Brighton, Birmingham, Manchester and Leeds need a licence to operate. As such, they are subject to benchmark conditions and extra compliance, while other properties will require a Housing Health and Safety Rating System risk assessment. The obligations often outweigh any gains.”
Jason also highlights how the cost of living crisis – something that is heightened in cities – is bringing arrears back into focus. “In June 2023, figures collated by City Hall revealed 24% of private tenants in London (about 650,000 people) were struggling to meet rent payments, while 6% (about 160,000) said they had fallen behind with rent payments in the last six months,” comments Jason.
Also on the horizon is a potential change in Government, with rent controls becoming a real possibility. This is an issue that has already plagued Brighton. Carline Lucas, the MP for Brighton Pavilion, is well known for her support of rent controls and while she is not standing as a candidate at the next General Election, her replacement – Sian Berry – is equally as enthusiastic about capping the amount of rent charged in the city.
The final factor that may decide whether landlords in city locations keep faith or leave are the first glimmers that rents are cooling. In October 2023, Goodlord’s monthly rental index revealed the average rent on new tenancies dropped by 11%.
In the following month, HomeLet’s November Rental Index showed the average UK rent had dropped by 0.3% during the month. In London, for example, the average monthly rent decreased by 0.8% in November.
“Up until now, landlords have been able to offset running costs and higher mortgage repayments with healthy rental income. If new tenancies, however, need to be priced more competitively as rental values start to fall, this could compromise income,” says Jason. “We still don’t know where mortgage rates will be in 2024 and landlords moving off fixed-rate finance may find their buy-to-lets start running at a loss.”
Open Property Group is actively buying rental properties in cities, giving landlords a fool proof way out of the buy-to-let market. If you have an investment property or portfolio lets in London, Brighton, Birmingham, Manchester or Leeds – or any UK location – contact us.
Our team of professional property buyers will give you an honest and transparent valuation, with a cash sale possible in as little as seven working days. Or you can select an exchange and completion timeframe to suit your situation.
You can choose to wait until you have vacant possession or sell to us with renters in place – even sitting tenants. As a professional landlord and property manager, Open Property Group will seamlessly take over any tenancy for a simple, stress-free and cost-effective way to leave lettings.
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