Recent data from the Office for National Statistics (ONS) indicates a modest year-on-year increase in house prices by 0.2%. While this increment may suggest a rejuvenated market confidence among homeowners and buy-to-let investors, it also brings with it a set of implications for those operating on a smaller scale within the sector.

According to Alan Davison, personal finance distribution director at Together, this minor hike in property prices is likely to influence a significant demographic shift in the buy-to-let market. Smaller landlords, those managing a few properties, are predicted to recede from the scene. Lower yields and higher mortgage costs are diminishing the financial attractiveness of holding onto rental properties, especially when these factors are weighed against the demands of property maintenance, management, and overall time investment.

What Does the Future Hold?

Despite the anticipated exit of smaller landlords, the buy-to-let market is far from facing a downturn. Instead, a new era beckons, with professional landlords who own multiple properties expected to fill the gap. This transition is significant for several reasons.

Firstly, the shift towards more substantial, experienced investors can lead to a more stable and professionally managed rental market. These landlords often have the financial buffer and expertise to maintain properties effectively and navigate the complexities of the market, especially during uncertain economic times.

Secondly, and perhaps most importantly for the broader property market and potential homeowners, is the impact on property availability. Davison notes that “due to the residential buy-to-let sector being mainly made up of smaller properties in the past, this move will mean more properties will become available for first-time buyers.” As such, the retreat of amateur landlords could potentially ease the supply-demand tension, providing a boon for those looking to step onto the property ladder.

Stabilisation of the Market Expected

Looking ahead into 2024, there’s a general consensus that property prices are expected to remain relatively stable, with no significant drops on the horizon. This stability further reinforces the attractiveness of the property market to larger buy-to-let investors looking for a dependable investment avenue.