Landwood Group reports a staggering 150% increase in the involvement of Insolvency Practitioners with BTL. These professionals are stepping in to manage properties for landlords who are struggling to stay afloat.
According to Landwood Group, this troubling trend stems from several factors that have created a perfect storm for property owners. Increased regulatory pressures and higher tax burdens are primary contributors. Holly Surplice, a director at Landwood, said, “Recent legislative shifts, fluctuating interest rates and rising living costs has not only made it unprofitable for buy-to-let landlords, it is also having a prolonged impact on the quality of the UK housing stock. Especially now, with delays to the Renters (Reform) Bill, landlords are left in limbo watching costs soar while they are unable to improve their portfolios. A significant portion of this declining stock stems from buy-to-let portfolios purchased in better times when prices were higher and which haven’t fully recovered since. Purchasing at peak prices, coupled with economic downturns, more regulation and increased costs due to tightening energy efficiency rules, has left landlords unable to maintain their investments and property quality.”
The Impact of Rising Mortgage Rates
From 2009 to 2021, low interest rates provided a buffer for financing properties. However, the recent upturn in mortgage rates has significantly altered the landscape, making it much more difficult for landlords. Some have attempted to offset these increased costs by raising rents, but this is not a viable solution in every market, which varies widely in terms of what renters can afford.
Maintenance Challenges and Consequences
Another major issue emerging from this crisis is the neglect of property maintenance. Surplice notes that a lack of funds has led to some landlords failing to keep up with the upkeep of their properties. This neglect is causing a severe decline in both the curb appeal and the intrinsic value of these properties, with many becoming uninhabitable or non-compliant with health and safety standards.
Auctioning Off Properties
As conditions worsen, more landlords are turning to Landwood Group to auction their properties, viewing it as their last viable option to exit the market. These auctions range from single homes to portfolios encompassing over a hundred properties. This is a telling sign of the desperation faced by many in the sector, highlighting the critical state of the UK’s rental housing market.