Landlords who purchased properties soon after the launch of the first buy-to-let mortgage in 1996 are retiring in increasing numbers, according to new data released by Hamptons.
The resulting sales of properties could impact the rental market, as the gap left by these retiring investors may not be easily filled by new entrants, the agency said.
The changing dynamics of the buy-to-let market, along with the evolving needs of an ageing population of landlords, are likely to shape the future of the rental sector in the coming years.
With the average landlord now aged 60, it’s predominantly these older investors who are exiting the market, resulting in around 140,000 landlords retiring in 2022 alone, accounting for nearly three-quarters (73%) of all landlord sales.
This trend is expected to continue in the coming years, as approximately 96,000 landlords are projected to turn 65 each year across Great Britain. In addition, there are already nearly one million landlords (924,000) who are over the age of 65.
Over the past 12 years, between 2010 and 2022, the number of landlords retiring annually has doubled as their demographic ages.
The properties purchased by these landlords 15 to 25 years ago following the introduction of the buy-to-let mortgage still make up the majority of privately rented homes in Great Britain. Just over half (51%) of the current total number of outstanding buy-to-let mortgages were taken out between 1996 and 2007.
It is this cohort of ageing investors who bought properties during the rapid growth of the sector that are now increasingly likely to sell and cash out, leaving a gap that is not being filled by new landlords entering the market.
Recent investor sales reflect the ageing profile of landlords. In 2023, 45% of homes sold by landlords were bought at least 15 years ago, a figure that has risen each year since 2018 when it stood at just 33%. This proportion is expected to continue rising as more landlords reach retirement having purchased their buy-to-let properties a couple of decades ago.
The data also reveals that many of the first buy-to-let mortgages were used to purchase new low-rise city centre flats, which form the largest proportion of sales by today’s long-term landlords.
Suburban London tops the list, with 60% of landlord sales in Redbridge having been owned for 15-plus years, followed by 59% in Ealing, 58% in Harrow, 55% in Barnet, and 53% in Enfield.
While age tends to be the primary trigger for selling properties, in many cases, the decision to sell has been compounded by lower-than-average returns, exacerbated by higher interest rates.
An investor who bought a property 20 years ago was achieving a gross yield of 4.3% relative to their sale price, compared to a landlord buying today who is achieving 6.1%. This implies that in many cases, these landlords are selling homes where long-term tenants were paying rents that have slipped below market rates.
I understand from many of these Landlords that they had no intention of selling especially the ones with agents, just the government and shelter have forced their hands.
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The baby boomers who thought about it & bought property as an investment were transaction price index linking their children’s first mortgage to what the home was worth when they bought it.
The equity in a 2 bed BTL starter home transferred to a son or daughter 7 years before the parents die falls outside inheritance tax (bonus worth 40%). The tenants have paid the mortgage for all these years and what might have required a £100k mortgage on a £125k purchase price only needs the son or daughter to take out a £100k mortgage on their first home which is probably worth £250,000.
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It is not just the retirement age thing but this has been significantly influenced by the additional rules and regulations and unrelenting and continuing legal changes in the last 10 years and still coming. As landlords get a little older they will become less accepting of the constant legal changes and may find it easier to put their investment into less proactive forms of investment. The reduction in rental supply is a direct result of Shelter’s (and the likes) inputs and the Governments brainwashing by shelter in their anti landlord rhetoric. Result the losers are tenants; for landlords it is just a change of thinking and change of investment. Shelter, who house no one, are on a crazy politcial high and damage the very people they always claim they help and protect. If I were a tenant it is not the type of help I would like, I would not like the reduction is supply, the driving up of my rent , the increase in competetion etc. Yes I accept there are some scum landlords and there has always been but the best way of driving them out is a plentiful supply so the market drives them out rather than legally driving them out with over regulation. History tells us this following the titanic failure of the Rent Act 1977 which killed the rental market stone dead. Politicians educate yourselves and wake up!
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Exactly this!!!!!
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Shelters input and George Osbornes taxation policies have a lot to answer for in this regard too. If the sector is to flurrish, supply increase and rent increases level off then the Government needs pro landlord policies, not ones purely aimed at securing a tenants vote.
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