Landlords appear to be selling up in droves, according to the latest figures from Rightmove.
The proportion of former rental properties currently for sale is at its highest level on record, the property portal revealed today.
It is said that 18 percent of homes now for sale were previously available for rent, compared with 8 percent in 2010.
Enough: The proportion of former rented properties moving into the sales market is at its highest level on record, according to Rightmove, indicating that more landlords are selling
London homeowners in particular appear to be heading for the exit. In the capital, nearly a third of homes for sale were previously rented.
Scotland and the North East of England are also seeing large numbers of homeowners selling – 19 per cent of homes on the market were previously rental properties in both regions.
Is this an exodus or a gradual departure?
While it seems clear that more and more homeowners are selling, this is by no means a large-scale exodus – at least not yet.
On average over the past five years, 14 per cent of homes for sale on Rightmove are properties that were previously rented, so the 18 per cent share seen today is not necessarily a huge change.
Rightmvoe says the number of homes for sale has risen to a seven-year high, with the average estate agent having 33 homes to sell.
This would mean that on average, each real estate agency branch sells approximately six to seven former rental properties at the moment.
Losing its calling: Nearly a third of all homes for sale in London were previously available on the rental market
Rightmove property expert Tim Bannister says that despite the trend of more and more homeowners selling, there does not appear to be a mass exodus.
“We will need to monitor the long-term impacts of what happens to the rental supply that is put up for sale,” Bannister said.
‘For example, these homes could offer more options to first-time homebuyers.
“They could also be bought by other owners and put back on the rental market, which would signal a changing of the guard rather than a complete exit of the owners.”
However, while some owners appear to be selling, fewer also appear to be buying.
The proportion of homes purchased by owners has fallen to a 14-year low, according to to the Hamptons real estate agent.
It reported that only one in ten homes sold during the first half of this year went to an investor who bought them to rent out, the lowest percentage since records began in 2010.
The result of all this is that the rental market appears to be gradually shrinking.
Sales: Homeowners bought just 10% of all homes sold during the first half of this year, the lowest share seen since 2010 according to real estate agency Hamptons
In fact, the number of properties available to rent across the UK has fallen by a quarter since 2019, according to consultancy TwentyCi.
It says properties available for rent are at their lowest level since it began recording data 15 years ago.
And with fewer homes for tenants to choose from, it means rents continue to rise.
Chris Norris, policy director at the National Home Owners Association (NRLA), says Rightmove’s findings will be a serious concern for all those renters struggling to find a place to call home.
“With demand already far outstripping supply, Rightmove suggests the situation will only get worse,” Norris said.
‘Every rental home that is sold simply exacerbates the imbalance between supply and demand.
‘While some of these properties will inevitably end up in the owner-occupied housing market, that will be of little comfort to those households struggling to access quality housing.’
Why do owners sell?
Some landlords may be selling up because of the proposed rise in Capital Gains Tax (CGT) in the Autumn Statement on October 30 thanks to the alleged £22bn black hole in the nation’s finances.
It is no secret that Chancellor of the Exchequer Rachel Reeves is looking for ways to address this problem as many fear tax increases are on the horizon.
One such tax increase being considered could be capital gains tax, which is the tax paid on profits earned during the time a person owns an asset.
Currently, homeowners who pay higher tax rates face a 24 percent tax rate on capital gains they make when they sell their properties.
There are fears that CGT could be brought into line with income tax, which could mean CGT rates rising to 40 per cent for higher rate taxpayers or even 45 per cent for additional rate taxpayers.
| Capital gain | Current Basic | If it is aligned | Impact | Highest current | If it is aligned | Impact | Additional current | If it is aligned | Impact |
|---|---|---|---|---|---|---|---|---|---|
| Gain | 18% | 20% | 24% | 40% | 24% | 45% | |||
| £10,000 | £1,260 | £1,400 | £140 | £1,680 | £2,800 | £1,120 | £1,680 | £3,150 | £1,470 |
| £20,000 | £3,060 | £3,400 | £340 | £4,080 | £6,800 | £2,720 | £4,080 | £7,650 | £3,570 |
| £30,000 | £4,860 | £5,400 | £540 | £6,480 | £10,800 | £4,320 | £6,480 | £12,150 | £5,670 |
| Source: Quilter | |||||||||
Neela Chauhan, a partner at accounting firm UHY Hacker Young, believes that an increase in capital gains tax could prompt more homeowners to sell.
‘An increase in capital gains tax in the budget will only accelerate landlords’ exit from the buy-to-let market. Declining landlord numbers could lead to higher rents.
‘The decline in the number of homeowners is the result of efforts by various governments to make rental investment less attractive. This is not going to improve under the new government.
‘Many small owners with just one or two properties are realizing that the income simply no longer compensates for the work.’
Marc von Grundherr, director of the London-based estate agency Benham and Reeves, also fears that an increase in capital gains tax would hurt investment in brick-and-mortar buildings.
Marc Von Grundherr, director of estate agency Benhams & Reeves, says a possible rise in capital gains tax will worry many property owners.
“The possible equalization of capital gains tax is of course a concern for many property owners,” said Von Grundherr.
‘If the Labour government goes ahead with this measure, it could lead to a significant increase in the taxes paid by the average homeowner when the time comes for them to leave the sector.
“This would be another blow to those providing the vital housing stock urgently needed in the rental sector, following a series of legislative changes already introduced in recent years which have affected profitability.”
In addition to the threat of the CGT, there are other changes that will worry property owners.
Not least, a ban on no-fault evictions, changes to EPC rules and increased regulation and licensing.
Rightmove suggests there needs to be incentives for landlords to stay and continue to invest in the private rental sector to provide a healthy market for tenants.
“In recent years it has become more attractive for some landlords to exit the rental sector rather than continue to invest in it, due to rising costs, taxes and legislation,” added Tim Bannister of Rightmove.
‘A healthy private rental sector needs investment from landlords to offer tenants a good choice of housing.
‘We have seen in recent years how the imbalance between supply and demand can contribute to rising rents, so there is concern that if landlords are not incentivised to stay in the rental sector rather than leave it, it will be tenants who pay the price.
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