According to the latest data from Rightmove, there has been a notable increase in landlords selling their properties. The proportion of homes previously used as rental properties that are now listed for sale has reached an all-time high. Rightmove’s figures show that 18% of homes currently on the market were once available for rent. This is a significant rise from the 8% recorded back in 2010.
The trend is particularly evident in London, where nearly a third of homes for sale were previously rental properties. This suggests a strong shift among landlords in the capital, who appear to be exiting the rental market in large numbers.
The reasons behind this trend could be varied, including changes in rental regulations, rising costs, or market conditions that make selling more attractive than renting. The increased volume of rental properties being sold may also impact the housing market, potentially leading to a reduction in rental availability.
This surge in sales of former rental properties reflects broader market dynamics and could signal further shifts in the property landscape. Landlords, especially in London, seem to be capitalising on current market conditions to sell their properties, potentially reshaping the rental and sales markets in the process.
Is this an exodus or a gradual exit?
While there is evidence that more landlords are selling their properties, this does not yet indicate a complete exodus from the rental market.
In recent years, about 14% of homes listed for sale on Rightmove were previously rental properties. The current figure of 18% represents an increase but is not a dramatic shift compared to the average over the past five years.
Rightmove has noted that the total number of homes for sale has reached its highest level in seven years. On average, estate agents now have 33 properties listed. This suggests that each estate agency branch is currently selling approximately six to seven former rental properties.
Tim Bannister, a property expert at Rightmove, points out that while more landlords are choosing to sell, this does not amount to a mass exodus. He notes that the long-term effects on rental supply need to be observed. These properties could potentially provide more options for first-time buyers or be bought by other landlords, which would mean a shift rather than a complete exit from the rental market.
Moreover, fewer landlords seem to be buying properties. According to estate agent Hamptons, the proportion of homes purchased by landlords has dropped to a 14-year low. Only 10% of homes sold in the first half of this year were bought by buy-to-let investors, the lowest percentage recorded since 2010.
As a result, the rental market appears to be slowly contracting, with fewer properties being added and more landlords choosing to sell.
The number of rental properties available across the UK has dropped by 25% since 2019, according to consultancy firm TwentyCi. This marks the lowest level of available rental homes since the firm began recording data 15 years ago.
With fewer rental options available, rents are continuing to increase. Chris Norris, policy director for the National Residential Landlords Association (NRLA), highlights that Rightmove’s findings are concerning for renters who are already having difficulty finding suitable housing.
Norris points out that the imbalance between supply and demand is worsening. “Every rental property sold only makes the supply-demand gap worse,” he said. “Even though some of these properties may end up on the owner-occupied market, this provides little relief for those struggling to find quality rental housing.”
Why are landlords selling?
Some landlords might be selling their properties in anticipation of a possible increase in Capital Gains Tax (CGT) announced in the Autumn Statement on 30 October. This move is part of efforts to address a £22 billion shortfall in government finances.
Chancellor of the Exchequer, Rachel Reeves, is exploring ways to tackle this financial gap, and many are concerned about potential tax increases. One possibility being discussed is raising CGT, which is the tax on profits made from selling an asset.
Currently, landlords who are higher-rate taxpayers pay a CGT rate of 24% on any gain from selling property. There are concerns that CGT rates could be aligned with income tax rates, potentially increasing to 40% for higher-rate taxpayers or even 45% for additional-rate taxpayers.
Neela Chauhan, a partner at accountancy firm UHY Hacker Young, believes that an increase in Capital Gains Tax (CGT) could lead more landlords to sell their properties.Â
She notes that a rise in CGT would likely accelerate the trend of landlords exiting the buy-to-let market. This reduction in the number of landlords could result in higher rents. Chauhan points out that previous government actions have already made buy-to-let investments less appealing, and the situation may worsen under the new administration. Smaller landlords, in particular, may find the returns on their investments no longer justify the effort involved.
Marc von Grundherr, director at Benham and Reeves estate agents in London, shares similar concerns. He fears that increasing CGT could further undermine the attractiveness of property investment. If the Labour government implements such a change, it could significantly raise the tax burden on landlords when they sell their properties. This could be detrimental to the rental sector, which already faces challenges from recent legislative changes aimed at reducing profitability.
Landlords are also facing other pressures, including the ban on no-fault evictions, new EPC regulations, and increased regulation and licensing. According to Rightmove, incentives are needed to encourage landlords to remain in the rental market and continue investing.
Tim Bannister from Rightmove explains that rising costs, taxes, and legislation have made it more appealing for some landlords to exit the rental sector. A healthy rental market requires ongoing investment from landlords to offer tenants a good range of housing options. The imbalance between supply and demand has contributed to rising rents, and without measures to retain landlords, tenants may face higher costs.
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