Landlords selling up boosts supply of affordable homes

Faced with rising mortgage rates and mounting costs, a wave of landlords is opting to sell their properties, leading to a surge in the availability of affordable homes, Zoopla reveals.

The housing platform says that 11% of homes currently listed for sale were previously rented out, marking a decline from the pandemic-driven peak of 14% in 2020 when rents were plummeting in major cities.

It points out that traditionally, around half of these properties return to the rental market due to difficulties in finding buyers or are acquired by other investors.

However, recent trends indicate that a third of these homes are being sold off as landlords seek to capitalise on capital gains to reduce debts or fund their retirement.

The average price of a previously rented home

Zoopla’s latest House Price Index also reveals that the average price of a previously rented home stands at £190,000, that value is 25% lower than the average value of owner-occupied properties.

These properties are proving popular with first-time buyers on the lookout for more affordable fixer-upper options.

The influx of reasonably priced properties is expected to drive sales activity among this crucial segment – which accounted for more than a third of all sales last year.

And, despite slightly weaker demand compared to the previous year, the number of agreed sales has reached its highest point in 2023, boasting an 11% increase over the five-year average.

However, over the past six months, average house prices have dropped by 1.3%, with the rate of decrease gradually slowing down due to improving buyer confidence and a rising number of successful sales.

‘Brought more buyers and sellers into the market’

Richard Donnell, Zoopla’s executive director, said: “Falling mortgage rates in recent months, together with the strength of the labour market, has brought more buyers and sellers into the market.

“There are still fewer buyers in the market than a year ago, but sales are still being agreed with more homes to choose from.”

He adds: “Sellers shouldn’t get carried away by more positive data on the housing market and need to price their homes realistically if they are serious about moving home in 2023.

“Home buyers remain price sensitive with one eye firmly on the outlook for the economy, the cost of living and the trajectory of mortgage rates which appear likely to edge higher in the coming weeks.”

‘Risk of rising rates casts a shadow over the market’

Sarah Coles, the head of personal finance at Hargreaves Lansdown, said: “Zoopla’s sunny optimism about property has dimmed slightly, as the risk of rising rates casts a shadow over the market.

“It highlights there are still plenty of positives – including higher sales, and fewer price reductions.

“To an enormous extent, the future of the market lies in the Bank of England’s hands.”

She added: “However, last week saw the dark clouds roll in.

“The rise in core inflation saw the market price in rate rises to around 5.5%.

“There’s a reasonable chance this is an over-reaction, and more evidence of a global slowdown could take some of the heat out of the swaps market and bring these expectations down.

“However, in the interim, it’s bad news for mortgage borrowers.”

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