Nearly 40% of landlords are planning to sell property – twice as many as those expecting to buy. That’s according to new research from BVA-BDRC.

1. Selling vs Buying: Landlords are selling their properties more than they are buying new ones. Specifically, 12% of landlords sold properties in the second quarter of 2023, while only 5% bought new ones.
2. Downsizing Plans: A whopping 37% of landlords are thinking about reducing the number of properties they rent out in the next year. This is the highest it’s ever been.
3. Less Willingness to Expand: Only 8% of landlords want to buy more properties to let.
4. Tenant Demand: Interestingly, demand from tenants is going up, with 67% of landlords saying that more people are looking to rent from them.
5. Concerns: There’s increasing worry that the housing market for renters is going to get tight, making it difficult for people to find places to live.
6. Why This Matters: The National Residential Landlords Association (NRLA) is concerned that if the government doesn’t change certain tax laws, the situation will get worse. Ben Beadle, Chief Exec of the NRLA, said: “The Government must reverse its damaging tax hikes on the sector. It is frankly absurd to have a tax system that punishes landlords for providing the homes tenants so desperately need whilst favouring holiday lets.”

So, What Does This Mean for Property Investment?

1. Supply & Demand: There’s strong demand for rental properties, but fewer landlords are willing to supply them. Basic economics tells us that when demand is high and supply is low, prices usually go up. So, rents could rise, making it potentially more profitable for those who stay in the landlord game.
2. Uncertainty: The property market is a bit like a seesaw right now. High tenant demand should be good for landlords, but increasing costs and tax pressures are pushing landlords away. If you’re considering investing in rental properties, you’ll want to weigh these factors carefully.
3. Government Action Needed: If the government changes tax laws in favour of landlords, such as reducing the stamp duty or easing mortgage interest restrictions, this could encourage more landlords to buy properties. Keep an eye on political developments, as they could impact your investment decisions.
4. Mortgage Considerations: With mortgage costs going up, your upfront and ongoing costs could be higher. Make sure you do the math to see if the investment still makes sense for you.
5. High Demand Areas: If tenant demand is soaring, targeting your investment towards high-demand areas could yield good returns. However, be cautious of the overall trend of landlords downsizing their portfolios.
6. Different Investment Approaches: Given the market’s current state, you might want to consider different types of property investments. For example, holiday lets are currently taxed more favourably, according to the NRLA.
7. Your Risk Appetite: Lastly, the market is a bit volatile. If you’re risk-averse, you might want to hold off or look into other forms of investment.

In a nutshell, the landscape for UK property investment, especially for would-be landlords, is quite shaky at the moment. While tenant demand is high, financial and tax pressures are causing landlords to reconsider their investments. It’s a time for caution, but also a time to keep a keen eye on opportunities, especially if government policy changes.