The current year has seen a continued trend of property sell-offs by landlords across Great Britain, especially notable in Scotland. The property website Rightmove highlights that new seller asking prices have declined by 1.7%, a decrease of £6,088, settling at an average of £362,143. According to Hamptons, an upmarket estate agency, landlords are on track to have purchased the fewest homes since 2010, discounting the period of the first Covid lockdown.
The Diminishing Landlord Market Share
The proportion of homes sold by landlords in Great Britain decreased from 15.7% in 2022 to 14% in 2023. When compared to 2015, where investors bought 15.7% of all homes for sale, this year, they have only purchased about 11.2%. This downturn is attributed to several factors, including changes in buy-to-let taxation, soaring mortgage costs following 14 consecutive interest rate hikes, and new house emissions regulations.
Energy Regulations and Landlord Response
From 2028, landlord-owned properties must have an Energy Performance Certificate (EPC) rating of C or better. This upcoming requirement is expected to necessitate costly upgrades for many properties, prompting some landlords to opt for selling their properties now.
Rental Market Tightens
The estate agency reports a 43% reduction in homes available for tenants in the first 10 months of this year compared to 2015. Scotland, in particular, has witnessed the largest sell-off by landlords in 2023, with landlords constituting 12% of all sellers, an increase from 10% in 2022. This surge is attributed to tighter regulations, including rent caps, which have led to a record low of 6% in landlord purchases.
The Impact on Rent and Landlord Strategies
Aneisha Beveridge, head of research at Hamptons, predicts a 25% increase in rents by the end of 2026 due to the scarcity of rental properties. Despite strong rental growth softening the impact for landlords, many are drawing on their equity and cash reserves. Portfolio investors, particularly those with higher leverage, are strategically selling a portion of their properties to reduce mortgage debt on the rest.
The Cooling Property Market
The property price boom is waning. Rightmove reports a 1.7% drop in new seller asking prices to £362,143 as of November. Lloyds Bank forecasts a continued decline in UK house prices, not expecting recovery until 2025. Similarly, Savills anticipates a 3% fall in average UK house prices in 2024 after a 4% drop this year.
Market Slowdown: A Closer Look
Tom Bill, head of UK residential research at Knight Frank, notes that the market slowdown is characterized more by a significant reduction in transactions than by a dramatic price correction. This is partly due to the weak supply of properties. He anticipates a stabilization in prices and sales volumes next year as the economic backdrop stabilizes.