In the North East of England, a significant number of buy-to-let landlords are choosing to exit the property market, confronted by diminishing profits and escalating mortgage rates. The trend reflects broader economic challenges and shifting market dynamics that have made the buy-to-let investment increasingly untenable for many.

Karen Whiting, an associate director at Durham-based Azets, has observed a surge in landlords deciding to sell off their property portfolios. These portfolios typically range from four to nine properties. “With higher mortgage rates, and the associated cost of servicing debt at a 16-year high, they’ve had enough and are getting out of the market,” Whiting explains.

The Crunch of Rising Costs and Low Returns

The core issue for these landlords stems from the climbing costs of maintaining mortgages amidst historically low rental yields in the region. The North East holds the record for the lowest monthly rents in the UK, averaging £550 compared to the national average of £850. This disparity puts additional pressure on landlords, as raising rents to cover increased costs is not viable due to local affordability constraints.

Whiting highlights that the profitability of rental properties has become increasingly challenging. “The numbers are no longer making sense for landlords unless they significantly raise rents, something many are reluctant to do due to local affordability limitations,” she said.

Government Policies Add to the Burden

Landlords in the area are also grappling with the repercussions of various government policy changes over the past 14 years. These include increased stamp duty on second properties and stricter borrowing criteria, which have further squeezed the profitability of buy-to-let investments.

National Context of Rising Rents

While the North East is experiencing an exodus, the national picture tells a different story. According to the latest data from Rightmove, UK private rents have reached record highs. London, for instance, saw a typical monthly rent peak at £2,633, marking an annual increase of 5.3 percent. This stark contrast underscores the regional disparities within the UK’s property market.

The Pitfalls of Exiting

Exiting the market isn’t without its challenges and potential financial pitfalls. “BTL landlords need to personally file a capital gains tax return to HMRC within 60 days of property disposal or face tax fines,” warns Ms. Whiting. This requirement adds a bureaucratic layer to the already complex process of disinvestment. She further clarifies that this responsibility cannot be delegated to agents, as landlords must manage their own affairs through a personal gateway account with HMRC. Failure to comply with these regulations can lead to significant fines, with HMRC potentially collecting up to £150,000 if a landlord with property disposals totalling £3 million fails to submit the form on time.