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New research by Open Property Group has revealed a third of landlords (33%) plan to retire from or exit the buy-to-let market, while over a quarter are enquiring about selling more than one rental property. The headlines came after the professional cash property buyer questioned its database of landlord clients to establish why they may sell their rental property or portfolio.

Red tape pushing landlords to the brink

Almost a quarter (23%) cited too much legislation and compliance. A further 24% claimed that rising mortgage costs and/or changes in the tax landscape was also a motivation. Our clients said they were also selling because they owned a problem property, found the investment unprofitable, had management issues or had tenants in rent arrears.

Just days after Open Property Group’s research was read by more than 6,100 landlords, there was increasingly worrying news on the matter of debt. The latest figures released by UK Finance showed the number of landlords in mortgage arrears is increasing. In fact, the rate at which landlords are falling behand with buy-to-let mortgage repayments is rising faster than the same figure among owner-occupiers.

Buy-to-let mortgage arrears spike

UK Finance said the number of buy-to-let mortgages in arrears has risen 29% during the third quarter of 2023, to just over 11,500. For comparison, the quarter-on-quarter rise among owner occupiers is just 7%.

The collective voice for the banking and finance industry said that interest rate pressures are felt more acutely in the buy-to-let sector, where landlords may not be able to raise rents to cover the increases in their payments. On reflection, we will probably see an increase in landlords needing to sell property fast if they can’t remortgage with similar rates.

Is this the end for the small-time landlord?

This year has already seen a huge group of landlords sell up. As well as the property investors and portfolio holders we are helping here at Open Property Group, there are thousands more exiting the market. The scale of which has been highlighted by agent Hamptons.

Using its own data in tandem with figures from HMRC, it found property investors are set to sell 139,820 buy-to-lets across Great Britain in 2023. This mass exodus has critically affected the supply of available rental properties in circulation. For clarity, Hamptons found landlords purchased 11.2% of all homes sold across Great Britain so far this year but private landlords also accounted for 14.0% of all sellers during the same period, leaving the buy-to-let market at a net loss.

We have to agree with the agent, who commented that ‘buy-to-let increasingly only stacks up for the highest-yielding homes. This is particularly true for those investors with a mortgage. Consequently, landlords are increasingly selling lower-yielding homes.’

Additional research highlights

Open Property Group wanted to establish how many properties our clients owned. We found two fifths have just one rental property, over a third have three or more properties (36%) and almost a fifth (19%) have over five buy-to-lets.

High percentage wanting to sell with tenants in situ

With 85% of the landlords owning tenanted properties – 74% being single occupancy and 11% being multiple occupancy – it’s not surprising that the top reason for approaching a professional cash buyer was because they could sell with tenants in situ (34%). For 23%, the speed of sale was the most crucial aspect.

The most common type of property owned was terraced houses (39%), followed by flats (30%) and semi-detached houses (22%). When asked what condition the property(ies) was in, just 8% stated poor, and one in five class their rental as in excellent condition.

Increase in landlords contacting Open Property Group

Jason Harris-Cohen, Managing Director of Open Property Group, commented: “Landlord enquiries have certainly ramped up in the first three quarters of 2023 and our survey findings concur with the anecdotal conversations we are having with landlords. Most of them are simply fed up with the never-ending red tape, which is only worsened by the economic climate at the moment. As a result, retirement plans are being brought forward.”

“This is not good news for tenants, or the private rented sector as a whole, but the fact that most landlords would prefer to sell with tenants in situ does offer some reassurance. It also removes the complex and time-consuming process of serving a Section 21, hence why speed is a key reason that a lot of people approach a professional cash buyer like Open Property Group.”

“What surprised us most about these survey results is how much landlords are over-egging the condition of their rental properties. Less than 1 in 10 class their buy-to-lets as poor but the reality is that around a third of the properties we inspect are in a bad state of repair, as well as non-compliant.”

“If landlords are serious about selling and are struggling with unprofitable or problematic properties, then now is the time to act. With other research suggesting that many residential landlords are looking to commercial properties for a better return, it may be the case that our High Streets end up the winners and private tenants the losers.”

Landlords can sell their property for cash to Open Property Group for any reason. We will purchase a buy-to-let from a retiring landlord but are equally happy to relieve investors of rentals where there’s a short lease, rent arrears or dilapidations. Simply request a free online cash offer, or contact our team today.

Published on 20th November 2023

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