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An increasing number of buy-to-let properties in London are coming up for sale, limiting the availability of rental homes for tenants, research has found.
The share of properties in inner London that were rented at some time within the past 10 years reached 22 per cent of all homes newly listed for sale in the capital in data in July 2024, according to consultancy TwentyCi. A 10-year high, this compares with a share of just under 9 per cent across the UK.
The upward trajectory in the proportion of landlord sales has been substantial over the past five years, going from 15.6 per cent in July 2023 and 12.9 per cent in July 2019 — the last year of “normal” market conditions prior to the pandemic.
Colin Bradshaw, chief executive of TwentyCi, said factors behind higher sales included lower yields, fears around the risk of Labour raising capital gains tax, and an expected wave of measures such as the requirement for a minimum emissions rating of “C” for rented properties by 2030.
“If you think about it in the round, there is a lot more for landlords to comply with compared with where we were 10 years ago.”
The rapid pace of house price rises over the past decade has slowed recently, curbing capital gains, while higher mortgage costs have eaten into profits. Conservative chancellors looking to support first-time buyers introduced measures from 2016 designed to damp growth in landlord sales, limiting tax relief for higher rate-paying landlords and bringing in a stamp duty surcharge on buy-to-let and second homes.
Now the Labour government has said it will press ahead with amended plans for rental reform, under which tenants will have greater protection from “unreasonable” rent rises, while the “no-fault” eviction arrangements currently used by landlords will be scrapped.
A slowdown in the market for landlord investment was suggested last month by data on mortgage volumes. In the first three months of 2024 more than 41,000 buy-to-let loans were advanced in the UK, totalling £7bn, according to industry group UK Finance. This was a 16.7 per cent drop in the number of loans and a 17.3 per cent decline by value, compared with the same quarter in 2023.
Property site Zoopla said that, in spite of a recent easing of the strains on supply, the average letting agent still has a third fewer homes to rent compared with the pre-pandemic average.
This shortage of available property has driven higher rents. Growth in London rental costs soared by 17 per cent in 2022, with UK rents rising 11.9 per cent, according to Zoopla.
This has now softened to 5.7 per cent in the 12 months to June, the lowest UK growth rate for nearly three years. In research this week, Zoopla also recorded slight falls in rents in cities such as Nottingham, London, Brighton and Glasgow, as demand has eased.
In several places near major conurbations, where renting is better value for money, however, rents continue to rise. Rochdale added 6.9 per cent in the first half of 2024, with 5 per cent growth in Doncaster and Southend.
Zoopla said: “A small, but not insignificant, number of private landlords are continuing to sell rented homes in the face of a changing business environment and higher mortgage rates. This is acting as a drag on the total number of properties available to rent.”
