Amidst sky-high mortgage rates and the highest tax burden since the Second World War, new data from the estate agents firm Hamptons has revealed that landlords are selling more properties than they’re buying for the eighth straight year as an estimated 27,520 rentals are forecast to leave the market before the end of 2023.
In light of this, new data from Cornerstone Tax, the UK’s leading property tax advisory, has found that almost 1-in-5 landlords across the UK admit that they have considered selling up due to the rising costs associated with their property.
These trends are exacerbated within the UK’s largest cities, with 22% and 21% of landlords in London and Birmingham, respectively, considering an exit from the market.
Cornerstone’s figures also illustrate a distinctive North-South divide, with landlords in Manchester and Leeds being the least likely to leave the market compared to their southern counterparts.
According to the Group Chairman of Cornerstone Tax, David Hannah, record mortgage rates combined with the highest tax burden since the second world war have pushed many buy-to-let landlords out of the market, reinforcing a supply crisis that continues to squeeze budgets of tenants. Despite last week’s Autumn Statement offering some relief to the nation’s landlords by way of the unfreezing of the local housing allowance (LHA), Hannah argues that the roots of the current crisis remain largely unaddressed.
David Hannah, Group Chairman of Cornerstone Tax said, “Our data highlights a clear issue in the UK’s rental market. Many of these landlords took out mortgages on buy-to-let schemes during a period of sustained low interest rates; fast forward to 2023 and the pressure currently facing landlords is simply too much.
Spiralling interest rates and the highest tax burden since the second world war have forced thousands of landlords to sell up, which then puts further pressure on renters due to a lack of stock.
“We are generally seeing an exodus of landlords from the capital and South East, looking towards the North East of England instead. It’s a region that’s seen the highest growth in property prices in the last twelve months, with many seeing it as a much safer investment than the capital.
The current strain could have been eased in last week’s Autumn Statement by way of removing the second home surcharge from bona fide private rental sector investors and giving them a reduction in their acquisition costs as well as, reinstating full relief for mortgage interest payments in common with other businesses that have to borrow money to provide their services.
This double measure would have both reduced the costs of purchase, whilst allowing landlords to freeze, or even potentially cut, rents which have had to have both these penal measures “costed in” over the last few years. It would also stimulate purchases in the market at a time when owner occupiers are unable to purchase because of affordability issues.”