Landlords selling up take a 30% hit to quickly exit the sector

11:18 AM, 21st February 2023, About 2 years ago 4

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One property auction firm says that more than a third (38%) of their current lots are from buy-to-let investors looking to get out of the market quickly.

And it claims that some landlords are willing to take a hit of up to 30% on the property’s price just to leave the private rented sector.

Online property specialists My Auction points to high interest rates and the cost-of-living crisis hitting rental yields as being the main reasons for the increase in sell-offs.

The firm also says that yields are at a 14-year low with landlord mortgage payments exceeding rental incomes – leading to many squeezed BTL sellers to offload properties that don’t deliver returns.

‘Sped up the mass exodus of buy-to-let investors from the market’

Stuart Collar-Brown, the co-founder and director of My Auction, said: “The interest rate rises have solidified and sped up the mass exodus of buy-to-let investors from the market.

“However, other contributing factors, such as the consistent changes in legislation and taxation surrounding landlords in this section of the market, have made it almost unviable for some landlords to retain their investment properties.”

He added: “Landlords who are cash rich have the added benefit of not being reliant on mortgage rate increases, so we are seeing many making lower offers due to their ability to transact very quickly in a falling market.

“The expectation of landlords coming into the market now in terms of yield, has increased with many expecting a minimum of 8% which could equate to a reduction of as much as 25% compared with values this time last year.”

He says that investors in London are looking for rental yields of around 7-8%, compared to 5-6% pre-pandemic.

But sellers need to be realistic with their expectations compared with the peak of the market in August/September 2022.

Leaving the BTL market is not solely down to profit margins

My Auction says that the reason for leaving the BTL market is not solely down to profit margins.

It says that tax and legislation changes have made it difficult for some landlords to retain their investment properties – regardless of the exponential yields.

Over the last few months, the firm says that the most common type of property being sought by investors are two-bedroom flats (40%), followed by two/three bed houses (30%) and one-bedroom flats (15%).

Also, 15% of investment purchases have been HMOs – despite often being more difficult to manage they remain popular because they can offer returns of around 8%.

Landlords with cash to buy will be the biggest winners

The market analysis shows that landlords with cash to buy will be the biggest winners in the current market.

The firm says that some landlords are willing to sell their investment property for up to 25-30% less than they might have sold for before because they want to get out of the market quickly.

In addition, investment buyers are looking to achieve a rental yield of at least 8% for a property to be considered an attractive purchase.

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Tags: Auction, Landlords, selling up

Comments

northern landlord

11:59 AM, 21st February 2023, About 2 years ago

Can’t quite get my head around this one. Not clear if it relates to tenanted properties or vacant possession. Probably tenanted as vacant properties would generally go on the open market. It implies that as existing BTL landlords are selling up at a discount other investors ( surely just another name for BTL landlords) are snapping them up to continue to rent out (with the same or new tenants?) if they can achieve an 8% return on a now discounted price. If that’s the case there is no overall exodus of landlords, just exchanging old ones for new ones.

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Seething Landlord

12:23 PM, 21st February 2023, About 2 years ago

I guess it depends whether you classify cash buyers as BTL landlords or property investors.
It seems to me that the whole thrust of government policy has been to make the leveraged BTL model increasingly difficult to sustain and the rapid increase in interest rates has accelerated their success in achieving that objective. Whether it has gone too far and too fast remains to be seen but we may be deluding ourselves if we think that the consequences were unforeseen and unintended.

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shaun carter

0:45 AM, 22nd February 2023, About 2 years ago

Unless goverment allow land lords claim mortgage interest as expense, put hold on capital gains tax, and stop all this crap, making private landlords do more like on epc etc, they be all gone.
Also houses like the cornish cobb houses are far better than the crap they are passing.

It ok to have garages where you can even get out a smart car. It ok to have green timber frames; oh though green was wet.the goverment are really a bunch......
Too late when average 3 bed is €1500 a month,. I primary school kid can see what there doing.

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Trapped Landlord

14:02 PM, 22nd February 2023, About 2 years ago

So far , i have rode the storm pretty well , increased rents from massive demand have countered the relentless government / council attacks but i feel now like this may have been the plan all along, maybe it isn't down to careless government policy and unintended consequences, but the plan was to abolish the prs entirely!. With the expected section 21 withdrawal, epc changes, widespread selective licensing introductions. I suspect that an incoming labour government would make it even worse with rent control, right to buy, ni on unearned income. From what my grandfather tells me, we could be heading back to how it was after the war, when rent control and regulated tenancies alone were enough to devalue tenanted properties by 50%. Properties would double in value over night should the tenant leave for any reason then sold on to owner occupiers. I just hope i am wrong.

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Landlords selling up take a 30% hit to quickly exit the sector

‘Sped up the mass exodus of buy-to-let investors from the market’

Leaving the BTL market is not solely down to profit margins