Landlords continue selling up – but it’s not an exodus

There is a consistent stream of private landlords leaving the UK’s property market – and it has been a steady flow since 2018 – but it is not an exodus, Zoopla says.

The property platform says the overall number of privately rented homes has remained unchanged since 2016, thanks to increased investments from corporate landlords and institutional investors.

But rents now account for 28% of pre-tax earnings – the highest level for 10 years.

Zoopla also says that its data highlights that one out of every 10 homes listed for sale on its website were previously rented properties.

Landlords are feeling the pinch

Landlords with mortgages, who make up 20-30% of the market, are feeling the pinch as higher borrowing costs take their toll.

This pressure is more intense in London and the South East, which together account for 51% of landlord sales across the country.

However, while the trend of private landlords selling off their properties is not accelerating, it does highlight the shifting landscape of the rental market.

Richard Donnell, an executive director at Zoopla, said: “A proportion of landlords continue to sell but talk of an exodus is overstated.

“The real pressure of higher mortgage rates on landlords hits the 20-30% with the highest loan to value mortgages where landlords may need to inject extra capital when they refinance or look to sell.”

He added: “Half of all landlord sales are in London and the South East where yields are lowest and the economics of being a landlord are toughest.”

Rental affordability has reached its worst level in a decade

Zoopla also says that rental affordability in the UK has reached its worst level in a decade, with rents growing faster than earnings for the past 21 months.

Currently, rent accounts for 28.3% of average pre-tax earnings, compared to the 10-year average of 27%.

London remains the most expensive region for renters, with rent consuming an average of 40% of gross earnings.

However, this is still below the peak of 43% recorded in September 2015.

Among the 12 regions in the UK, seven are experiencing their worst rental affordability in a decade.

On a city level, Edinburgh leads the pack with a 13.7% increase in rental growth, followed by Manchester (13%), Glasgow (12.3%) and Southampton (10.7%).

Zoopla predicts that rental growth will decelerate to around 8% by the year-end, but this figure will still surpass earnings growth.

‘Renters continue to face a relentless increase in rents’

Mr Donnell said: “Renters continue to face a relentless increase in rents, compounding wider cost of living pressures and making home moving decisions ever more challenging, especially for singles and those on lower incomes.

“The chronic imbalance between supply and demand continues to push rents higher but we expect increasingly stretched affordability will start to reduce the pace of rental growth into 2024.”

He added: “While there is concern over the impact of higher mortgage rates on those with mortgages, renters have already seen a £2,820 a year increase in rental costs over the last five years.

“Some renters are experiencing more stress from higher rents with a jump in those finding the rent difficult to pay.”

The availability of rental homes

The data also reveals that the availability of rental homes is not expected to improve significantly, making a fall in rent prices unlikely.

The imbalance between supply and demand will continue to persist and higher mortgage rates will restrict first-time buyers entering the property market.

Rental home supply remains 20-40% below pre-pandemic levels in most regions, intensifying competition among renters and fuelling rental growth.

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