Landlords who are selling their properties this year might earn about £10,000 less than if they had sold earlier. Simply put, last year would’ve been a better time to cash out for the highest profit. That’s according to a report from estate agents Hampton’s.
A Look at the Numbers: On average, landlords this year have sold their properties for £94,800 more than their purchase price after holding them for about 11 years. This gain is lower by 10.1% compared to the previous year, where they would’ve gained an average of £105,300.
Why the Drop? The decreased profit is due to two main reasons: a. Slower growth in house prices. b. The kinds of properties being sold.
Mortgage Rates and its Impact: Higher mortgage rates have made some landlords think about exiting the property rental market. This is a bit like rising loan interest rates making some business owners consider shutting shop.
The Bright Side: Even with this, many landlords are still earning a good income through record high rents. So while the profit from selling might be less, the monthly income through rents is on the rise.
Aneisha Beveridge from Hamptons said, “As house prices start to slip back, there are signs that the landlords looking to sell today may have missed the top of the market. Rather, some investors are consoling themselves with record-breaking rental growth which is slowly ironing out the arithmetic for landlords.”
Geographic Differences: Different areas in the UK have seen different trends: a. Northern regions have seen a bigger drop in profits year-on-year. b. While house prices in the north, especially the North East, have seen substantial rises over the last seven years, in areas like London and the South East, they’ve been more static. This difference matters because even with static prices, London landlords still gain more in sheer cash terms due to the already high property values.
Future Trends: There’s a possibility that the profits landlords make when selling might decrease further. This is because of a combination of: a. Lower sale prices. b. Many properties sold now were bought when house prices were on the rise, so the profit margin is less.
Overall Rental Market’s Health: Rental prices are still seeing strong growth. For example, the cost of starting a new rental agreement has gone up by 9.9% over the last year, reaching an average of £1,282 a month. In fact, rental prices have been growing faster in the North than in the South.
Looking Forward: A combination of lower house prices and rising rents means the rental market remains appealing. But this also means that the government might earn less from taxes when landlords sell their properties. And with many landlords facing the decision to renew their mortgage rates soon, there’s a likelihood of rents increasing further.
In Summary: If you’re a landlord, last year would’ve been a better time to sell for maximum profit. However, with rents reaching record highs, there’s still plenty of earning potential. While areas like the North East are seeing a boom in property values, London remains a lucrative area due to its high property values. And looking forward, despite challenges, the rental market seems set to remain robust.