Hamptons’ analysis of data from Connells Group showed that nationally, 9.2% of homes listed for sale in June had been previously advertised for rent in the last five years. This was down from 11.3% of previously rented homes being listed for sale at the same time last year.
This was also lower than levels seen at the start of the year as well as in 2021, the first tax year since some landlords no longer benefitted from full mortgage interest tax relief.
Hamptons said this suggested that the Renters’ Rights Act may have prompted some landlords to sell, but most exits seemed to be due to earlier tax changes and higher mortgage rates.
The firm said market and regulatory changes had “pushed” many landlords out of the market over the last few years, and by the time the Renters’ Rights Act was implemented, many who wanted to leave had already done so.
Although there has not been a documented landlord exodus, the private rented sector’s growth has not been in line with the wider market. The number of rental homes in England has stayed fairly the same over the last decade at 4.8 million, while the number of homes has increased by around two million, with most of this going into owner-occupation.
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Most landlord exits in higher-priced regions
This differed across regions, with most landlord exits recorded in London and the South East, where property prices and mortgage costs are higher, while yields are lower.
In London, a fifth of homes up for sale in June had been let within the last five years, more than double that seen in the South East, where 9.5% of homes listed had been previously rented.
The biggest fall in landlord sales was seen across the Northern markets, where stronger yields make buy-to-let (BTL) investment more attractive and landlords more likely to retain stock.
The downsides of failing to sell
Hamptons noted that because of the Renters’ Rights Act, it had become trickier for landlords to decide to dispose of property, as the new law states that if a landlord serves a Ground 1A notice and evicts a tenant because they want to sell, they will be banned from re-letting the property for 12 months, even if they cannot find a buyer.
This means landlords risk being left with an empty property they cannot re-let for up to a year.
The firm’s analysis of homes listed for sale by landlords last year found that 51% failed to sell, rising to 60% among flats. It said if the new law were in place at the time, around 80,000-100,000 unsold rental homes would have been legally barred from returning to the rental market for a year, reducing the number of homes available to rent.
A slower market making landlords cautious
Hamptons said a slower sales market could also be making landlords reconsider their decision to sell, as the likelihood of not securing a buyer or achieving the asking price may be higher.
This may be a greater challenge in the South of England, where higher prices and lower yields impact investor appetite.
It could also be more difficult for flats, as Hamptons recorded that 24.4% of flats up for sale in June had been previously rented, compared to 7.8% of houses.
On average, it took one month longer for a flat to sell in June, with the average flat going under offer after 85 days compared with 59 days for a house.
Landlord conditions have improved
Aneisha Beveridge, head of research at Hamptons, said: “The Renters’ Rights Act has been a long time coming, and most landlords who wanted to leave the sector because of it have probably already done so. While the new rules may have encouraged some landlords to sell, the bigger shift has come from years of tax changes and higher mortgage costs, which have gradually reduced the number of landlords in the market.
“What’s changed more recently is the balance of risk. A tougher sales market and the introduction of a 12-month re-letting ban mean selling has become a more complicated proposition for landlords. For many, the prospect of being left with an empty property that can’t easily return to the rental market has made holding on to an investment look more attractive.
“For those landlords who have chosen to sit tight, there are signs that their decision may start to pay off. Yields have improved over the last couple of years as rents have risen faster than house prices, giving investors more headroom to absorb higher borrowing costs. At the same time, rental growth is picking up again, with rents on newly let homes rising at their fastest pace in more than a year. While challenges undoubtedly remain, conditions for landlords arguably look better than they did 12 months ago.”
