Landlords selling up – is it as bad as we think?

In recent times, things have become much tougher for landlords. No longer able to claim full mortgage interest relief, they also have to contend with more regulations and many will soon have to invest to bring their homes up to new minimum standards. Section 21 ‘no fault’ evictions are set to be scrapped, making some landlords wary of letting properties. Then there’s the problem of soaring interest rates, resulting in massive hikes to mortgage payments. Little wonder there’s a lot of talk about landlords selling up.

However, new research by property lending experts Octane Capital suggests that the landlord exodus has been exaggerated. But are they right?

News stories about landlords selling up

In recent months there has been no shortage of news stories about landlords selling up. Take this article from Sky News. According to this, the estate agents trade body Propertymark reported 13% more landlords selling up between July and October 2022.

Or take this news story from Property118 from November 2022. This reports that estate agents Hamptons reported that 16% of homes sold during the year were rental properties. This figure rises to 19% in London. The article also reports on figures from analysts TwentyCi. This organisation has done research showing that most landlords selling up are not selling to other landlords. It found that, in October 2022, 214,928 rental properties were advertised. Five years previously, that number was 339,516.

Is there really an exodus?

Now let’s return to the research by Octane Capital, as reported here. Its survey was completed by 2,000 landlords.

The research found that:

• 8% of investors had cut the size of their buy-to-let portfolio in the last year
• 41% of landlords want to see CGT tax allowance changes reversed
• 60% don’t think interest rate hikes have peaked
• 16% intend to increase the size of their portfolio over the coming year.

Chief Executive of Octane Capital, Jonathan Samuels, said: “It appears as though the exodus of landlords from the rental sector has been somewhat over exaggerated with just a small proportion opting to reduce the size of their portfolio in 2022.”

That said, he also acknowledged that many landlords remained cautious and unwilling to invest until a greater degree of certainty returns.

While it’s possible to put a positive (or less negative) spin on it, this research still found that significant number of landlords are selling up. It also found that landlords still have serious misgivings. For the sector to thrive, serious changes need to happen.

Landlords’ petition

The recent sharp increases in mortgage interest rates have significantly cut into already slender margins. This is one reason why a petition created by small, well-established landlord Simon Foster is currently gaining traction. The petition asks that the government:

“Reinstate tax relief allowing mortgage interest to be set against rental income.”

At the time of writing, the petition had almost 22,500 signatures. You can support the petition by visiting this link.

Should landlords sell up?

There’s no denying that landlords are selling up. Even if you don’t believe the exodus is as bad is was thought, it’s still an exodus. However, many of those remaining in the sector are starting to fight back at rules that have eaten into their profit margins. They’re also looking for ways to make their portfolios more profitable in the lean times. This is one reason we’ve created our Landlord Software Platinum Service for MTD. This a package offering dedicated landlord software, specialist advice and many other benefits. If you’d like to learn more, get in touch today. One of our accountants would be delighted to help you.