The Hamptons Letting Index revealed that gains on sold properties reached a peak of £105,300 in 2022.
The gains made by landlord selling up this year was similar to the returns seen in 2016, as the average gains decreased annually in every region for the first time since 2020, Hamptons said.
Biggest annual falls in northern regions
The firm said regions in the north saw the largest annual percentage declines which reflected slowing house price growth and a change in the type of property being sold. Hamptons noted that smaller terraced houses and flats made up a larger share of sales so far this year.
Landlords in the North East made gains of £22,200 when selling this year, which was a 15.7 per cent drop on 2022 and the largest annual decline across all regions. Landlords in Yorkshire and Humber saw a 10.1 per cent reduction to £44,800, while investors in the North West recorded a 10.8 per cent annual drop in gains to £52,500.
Despite this, landlords in the northern regions have been witnessing the fastest and largest rises in profits since 2016. Investors in the North East have seen a 176 per cent increase on the average gain on the sale of a property from 2016 to 2023.
The North East, North West and Yorkshire and Humber all recorded gains of more than 50 per cent since 2016. This is due to house prices in the north increasing more than properties in the South East and London, which have stayed fairly stable.
Because of the higher house prices, landlords in London saw the largest gains in monetary terms, with an average profit of £308,500. This was 3.4 per cent lower than the average gain of £319,300 last year, and 15 per cent down from the £365,000 peak in 2016.
On average, London, South East and East are the only regions where landlords are still making six-figure gains when selling up.
Gains in the South West dropped to five figures at an average of £95,700, marking an 8.8 per cent annual decline from £105,000 last year.
Smaller gains from newer investors
Hamptons predicted that the profit made from landlords selling up would fall further as prices dip and more sellers who bought later in the house price cycle dispose of properties.
The average landlord who sold this year had purchased their property 11 years ago. Hamptons said 65 per cent of landlord sales were homes which had been bought since 2009. This figure rose to 70 per cent for flat sellers who tend to hold on to these properties for shorter periods and therefore see lower gains.
So far this year, six per cent of landlords in England and Wales sold a property for less than they purchased it, slightly up from a proportion of six per cent in 2022.
Aneisha Beveridge (pictured), head of research at Hamptons, said: “As house prices start to slip back, there are signs that the landlords looking to sell today may have missed the top of the market. Rather, some investors are consoling themselves with record-breaking rental growth which is slowly ironing out the arithmetic for landlords.
“Lower house prices and higher rents will combine to shore up the rental market as more landlords hold off on the decision to sell. On the flip side, this will also weigh down on the government’s capital gains receipts handed over by landlords selling up over the next few years.”
Rental growth easing
Hamptons said there were signs that the pace of rental growth was “slackening” with the cost of a new tenancy in Great Britain 9.9 per cent higher than last year at an average of £1,282 per month.
The firm said rents were 28 per cent higher than February 2020, just before the pandemic hit Great Britain. Annually, rents have risen by more than five per cent for 27 months in a row, and increases have been higher than seven per cent for the last 10 months.
The rise in rental costs have been more pronounced in London, where they have increased faster than any other region. The capital recorded a 13.9 per cent rise in the average price of a new let since last year to £2,287.
Since the pandemic, rents in the North have increased faster than the South. In London and the South East, this represents growths of 26 per cent and 24 per cent respectively since February 2020, compared to rises of 31 per cent in the Midlands and a third in northern England.
Beveridge added: “New homes coming onto the market continue to achieve record rents and, in the short term, it’s hard to see what would put concerted downward pressure on the pace of growth. With around 35,000 landlords coming off fixed rate mortgages each month, the upward pressure on landlords’ costs marches on.
“In the run up to remortgaging, landlords are fighting to balance the books by paying down debt and hiking rents that have dropped below market rate.”
