Rents are at record highs – so why are BTL landlords fleeing the market?

Phil Spencer

With savers receiving poor returns from banks and building societies in recent years, a number of people have unsurprisingly continued to turn to residential property as a means of supplementing their income, supported by low mortgage borrowing rates, solid demand from tenants and stable yields, as buy-to-let consolidated itself as the investment of choice.

Even despite a challenging few years for the buy-to-let market, characterised by tax and regulatory changes, investment in buy-to-let has continued to outperform most major asset classes, as Britain’s rented sector continues to expand, with a sixth of the population now living in accommodation rented from private landlords.

But with interest rates rising, and an ever-growing level of rules and regulation coming into play, interest from new investors in the buy-to-let market is waning, while many existing landlords are now selling up.

Vanessa Warwick

A recent poll, undertaken by Mortgages for Business, found that a third of landlords – 33% – deemed the government’s plan to scrap Section 21 particularly concerning.

Under government plans, landlords are set to lose the right to evict tenants at short notice without giving a good reason for doing so. Until now landlords have been able to use Section 21 of the 1988 Housing Act to evict renters after the end of a fixed term tenancy, with two months’ notice.

Timothy Douglas

Government plans will effectively create open-ended tenancies whereby landlords will have to give a reason for eviction — such as rent arrears or antisocial behaviour — as well as include evidence of the tenant’s shortcomings.

To assess the impact that regulatory changes are having on landlords and to understand why many are potentially thinking about selling up in 2023, Move iQ’s latest people in property series sees presenter Phil Spencer joined by landlord and co-founder of Property Tribes, Vanessa Warwick, as well as Timothy Douglas, head of policy and campaigns at Propertymark.

The three property experts discuss the current state of the private rental sector and what impact landlords selling up is having on the housing market and UK renters.

 

x

Email the story to a friend



12 Comments

  1. MickRoberts

    You’ve only got to read this in the same organisation to see why we packing up.

    https://propertyindustryeye.com/new-legislation-provides-some-much-needed-clarity-for-landlords/

    Report
  2. MrManyUnits

    “Greedy” Landlords are selling up whilst rents are rising.

    Landlords have been bashed to submission, why save up for a deposit, legal fees, refurbishment costs, ongoing maintenance/overheads and rising interest rates and then a tax on turnover.

    The future rules look bleak for the PRS (rent caps/EPC and more) and I need a return without too much hassle so I’m out !

    Report
  3. jeremy1960

    2 words will summarise: –

    Government interference.

    Report
  4. Another House

    This situation could be seen coming a mile off and the endless landlord bashing has made the PRS toxic. This is not going to change as its not a vote winner to show support for landlords. I cant see it changing when a new government comes in, if anything it will become worse.

    Report
    1. MrManyUnits

      I imagine Landlords will get the blame when there are thousands on the street, or if the EPC debacle rumbles on Millions.

      With the net zero drive the Government could have a slogan.

      “Better to be outside than inside in the cold”  because that’s what they are attempting.

      Report
  5. Woodentop

    This is a merry go around story, everyone has been talking about this for not weeks but months and if I’m not mistaken at least a year, certainly the demonising of landlords has been going on for over a decade.

     

    The majority of landlords are not professional investors, they are your everyday person, many in later years looking to support retirement income who suffer badly financially when hit by rogue tenants, as there is no government support in these instances. The current political climate within all governments (cross party) and financial risks are so great anyone looking to increase their portfolio on BTL needs a strong stomach but they are the minority of landlords and the industry is imploding as the majority are starting to leave.

     

     
    I posted this 25th April 2023 on the story about BTL needing to increase rents to cover mortgages rates rise and responding to a poster comments how obvious rents are rising, but as many seem to only read PIE in the morning?, worth posting here today.
     Not as obvious as you would think. There is a limit to how much they can rise before the tenants can’t pay and they are being stuffed with rising cost of their own. What is missing in the story is that many a landlord may not be able to increase rents and we are seeing for many, the yield is starting to get close to non-existent, so why bother for any scraps that they may get, only to be lost if rates increase further? Not all landlords live in the home counties region with apparent oodles of money. Those tenants that have money to pay the high rents are doing so out of necessity, otherwise it is becoming far cheaper to buy and that is very true for many parts around the UK. A higher rate landlord paying 40% tax on gross income (criminal) a 25% to 30% increase in maintenance costs, net reduction to cover mortgage interest rises, add in all the licence fees (where applicable) and indemnity fee, plus agents charges ……….. not much left over or not worth getting out of bed for and sells up. Any wonder why very little new BTL landlords are entering the market when stamp duty is costing 3% to 9% dependent on which part of the country and value. Add in the threatened £10,000 plus, EPC improvements required for a Band C …….. yipes who would want to jump into bed with that lot. The meltdown has already started in many parts of the country (supply and demand is proving this) and its going to get worse AND who’s the loser, the real loser? Homeless people joining the already over crowded temporary sheltered housing. If you don’t rent, you have no comprehension of the misery!
     

    Report
  6. LRC10

    Section 24 seems to be the biggest frustration to most BTL landlords i speak to.

    In what other business are you taxed on gross income?

     

     

    Report
    1. jan-byers

      I am taxed on my income?

      Report
      1. Woodentop

        Gross income ……. I think not.

        Report
      2. Jonah

        Almost no businesses are taxed on gross turnover, as landlords now are (with just a basic rate tax credit against financing costs). It’s the fundamental reason for the post-tax earnings of landlords making little financial sense. A Section 24 ****-up of massive proportions.

        Report
  7. Will2

    Thanks to the Government (the red conservative party) have been landlord bashing for a decade with the perenial interference from Shelter – the housing charity that houses no one, Generation Rant etc etc.  This has de-stabilised the private rented sector to the point of making it toxic to invest.  The worst item is S24 by tax ******** George Osbourne and the latest Teressa May abolition of S21. Add this lot up and add to the current changes where you are losing control of your investment away (abolition of s21) and changing the whole concept of what people originally invested in.  The Conning crass conservatives have proven themselves to be anti small business and only sleep with the big boys (or tenants if it buys them votes).  The other political parties are no better. They have for the last 10 years moved the goal posts every year. NOW there is NO confidence to invest even with the temporary attractive yeilds.  The politicians  lie and cheat and then expect to be voted back in by their  political groupies.  Thatcher (love her or hate her) introduced a private rented system that worked following the previous disasterous Rent Acts which killed the previous PRS stone dead. It was introduced as a PRIVATE RENTED SECTOR not the politicians social housing service they wanted it to become. These cretins moved the goal posts every year to the point the players are now leaving the field.  Well done you political fools, I feel sorry for the tenants that are being adversely affected but still feel the politicians are somehow helping them – deluded people. The never ending tom foolery politicians play without learning from history.

    Report
    1. MickRoberts

      Well said Will2, too many retrospective changes.
      Tenants vote for these things which we know makes em worse off. Helps one current tenant temporarily, hurts the next 1000 tenants wanting a house.

      Report
X

You must be logged in to report this comment!

Comments are closed.

Thank you for signing up to our newsletter, we have sent you an email asking you to confirm your subscription. Additionally if you would like to create a free EYE account which allows you to comment on news stories and manage your email subscriptions please enter a password below.