BTL landlords are shrinking portfolios despite rising rents

BTL landlords are shrinking portfolios despite rising rents

0:07 AM, 5th April 2024, About 2 months ago 33

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Buy to let investors in England and Wales are reducing the size of their portfolios, despite healthy rental income growth, research reveals.

According to Open Property Group, which analysed data on portfolio sizes and profitability, the average investor now holds 8.5 properties, a 1.6% year-on-year decline.

However, the regional variations are stark with Yorkshire and the Humber seeing the biggest portfolio shrinkage, with the average landlord now owning nine properties, a 27% decrease.

The West Midlands and South West also witnessed significant reductions of 19% and 13% respectively.

Portfolio sizes grew in outer London, the North West, South East and Wales.

‘Much has been made about the landlord exodus’

The firm’s chief executive, Jason Harris-Cohen, said: “Much has been made about the landlord exodus in recent times and it’s fair to say that the severity of this trend has been largely exaggerated.

“However, the figures do suggest that while buy to let investors may not be exiting completely, they are reducing the size of their rental property portfolios.

“In fact, buy to let investors are accounting for an increasingly larger segment of sellers looking to utilise the quick sale route, as they look to off-load part of their portfolio with minimum fuss or stress, having benefited from years of rental income and capital appreciation.”

He adds: “With a reduction in capital gains tax fast approaching, we expect more investors will look to streamline their portfolios given that the cost of existing is set to reduce and who can blame them?”

The trend of landlords shrinking their portfolios

The quick sale firm also found that the trend of landlords shrinking their portfolios coincides with an average rental income increase of 8.8%.

Yorkshire and the Humber again leads the way with a jump of 30.9%.

However, a closer look reveals a potential cause for the downsizing – declining profit margins.

Open Property says that rental yields have dropped by 1% in the North West and central London, suggesting rising costs are squeezing returns.


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Comments

Cider Drinker

8:31 AM, 5th April 2024, About 2 months ago

Rising rents mean the risk of non-payment (and worse) from disgruntled tenants increases.

Rents are not rising as quickly as the landlord’s costs. The reasons are well-documented.

NewYorkie

10:46 AM, 5th April 2024, About 2 months ago

After not increasing rents for 5 years [stupid, I know!], I am now getting a 9% yield on my remaining BTL. Unfortunately, my costs are even higher, and therefore I will be selling, and finally exiting the PRS.

Beaver

11:56 AM, 5th April 2024, About 2 months ago

On "...the average investor now holds 8.5 properties, a 1.6% year-on-year decline."

That's not consistent with figures from elsewhere; where do these figures come from?

Cider Drinker

12:02 PM, 5th April 2024, About 2 months ago

Reply to the comment left by NewYorkie at 05/04/2024 - 10:46
I have a similar yield on one of my properties.

For 2023/24

Gross rent, £6,000
Mortgage, £2,800
New boiler, £2,300
New meter box, gas run, £350
Insurance, £205
New tap, £110
New stop tap, £126
New CO Alarm, £18

Profit before tax, £81.

im absolutely rolling in it.

NewYorkie

12:46 PM, 5th April 2024, About 2 months ago

Reply to the comment left by Cider Drinker at 05/04/2024 - 12:02
Yield is a pointless metric.

Cider Drinker

13:10 PM, 5th April 2024, About 2 months ago

Reply to the comment left by NewYorkie at 05/04/2024 - 12:46
It is only profit and loss that matter.

I could sell and bank £50k. At k just 4% that’d be £2k instead of £81 and a whole load less hassle.

GlanACC

18:01 PM, 5th April 2024, About 2 months ago

I still do work for a couple of letting agents (computers) and they are busier than ever, however they have been struck by the number of landlords exiting the market and letting agents costs are soaring as well

Cider Drinker

19:01 PM, 5th April 2024, About 2 months ago

Reply to the comment left by GlanACC at 05/04/2024 - 18:01
Many landlords will need to reduce costs if their mortgage payments are going to be met.

I’ve never used a Lettings agent but I’d certainly be looking to lose this additional expense.

Most of the time, agents add very little value.

Mary Afolabi

19:22 PM, 5th April 2024, About 2 months ago

Reply to the comment left by Cider Drinker at 05/04/2024 - 12:02Cider, sorry to give you the bad news. According to your calculations, you will still need to pay £596.40 tax if you are in the 40% higher tax rate. No profit here.

Michael Booth

19:51 PM, 5th April 2024, About 2 months ago

Sell and you are giving yourself a cgt bill assuming you are not Ltd company, keep and you are running into llegistive disaster when liebor take control its bad enough now , but you wait and see what's in store when raynor is finished with the prs.

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