Early BTL investors are retiring and selling up

Early BTL investors are retiring and selling up

11:24 AM, 17th April 2023, About 11 months ago 39

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Most BTL investor sales are from those landlords who were among the first to invest after buy to let mortgages were launched in 1996, research reveals.

The findings from Hamptons show that landlords are now retiring and selling up in increasing numbers – and the number will rise over the coming years.

The estate and letting agents say that with the average landlord turning 60, it is now these older investors who are leaving the market.

The agency estimates that 140,000 landlords retired last year, and they accounted for nearly three-quarters (73%) of all landlord sales.

‘Early investors are starting to sell up’

Aneisha Beveridge, the head of research at Hamptons, said: “Two decades on from the birth of buy-to-let mortgages in the late 1990s, early investors are starting to sell up.

“This means that demographics alone will push up the number of landlord sales over the next five years to reach a new peak.

“This was likely to happen irrespective of the tax or regulatory changes introduced since 2016 and the more recent higher interest rate environment.”

Number of landlords who are retiring will continue rising

Hamptons says that with around 96,000 landlords turning 65 each coming year across Great Britain, the number of landlords who are retiring will continue rising and will hit a new peak in five years.

And this is on top of nearly 924,000 landlords who are already over the age of 65.

The research shows that between 2010 and 2022, the number of landlords who retired every year has doubled – and this will rise as the population grows older.

Properties that were bought by landlords

Hamptons says that properties that were bought by landlords 15-25 years ago still make up the majority of privately rented homes in Great Britain.

Just over half (51%) of today’s total number of outstanding buy-to-let mortgages were taken out between 1996 and 2007.

And it is this cohort of ageing investors who bought when the sector was growing rapidly that are now increasingly likely to sell up and cash out.

But they leave behind a gap which is not being filled by new landlords entering the sector.

‘Tax and regulatory changes haven’t driven a buy-to-let sell off’

Ms Beveridge said: “While the tax and regulatory changes haven’t driven a buy-to-let sell off, they have stemmed the next generation of landlords.

“The number of new purchases by landlords has remained relatively muted.

“Millennials, who have struggled to get onto the housing ladder, have not been in a position to afford or consider purchasing a buy-to-let too.”

The ageing landlord profile

Hamptons says that the ageing landlord profile has played out in recent investor sales with 45% of homes sold by landlords so far this year being bought at least 15 years ago.

That’s up from 2018’s figure of 33%.

The firm says that many of the first buy-to-let mortgages were used to purchase new low-rise city centre flats and it’s these flats which form the largest proportion of sales by today’s long-term landlords.

Suburban London tops the list with 60% of landlord sales in Redbridge having been owned for 15+ years, followed by 59% in Ealing, 58% in Harrow, 55% in Barnet and 53% in Enfield.

Rent growth in March reached its third ever double-digit increase

Meanwhile, Hamptons says that rent growth in March reached its third ever double-digit increase since its Lettings Index began in February 2014.

In March, the average rent for a newly let home reached £1,236 per month – that is 10.8% or £121pcm higher than the same month last year.

March also saw the second fastest increase posted in any month after the 11.5% increase in May 2022.

‘Rents keep moving in the opposite direction’

Ms Beveridge said: “While house price growth continues to slow, rents keep moving in the opposite direction.

“Tenants find themselves with a little more choice than they did last year, which has been reflected in a 10% increase in the number of tenants moving home.

“However, the number of rental homes on the market seems to have found a new normal at nearly two-thirds below pre-pandemic levels.”


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Comments

Neil P

12:27 PM, 17th April 2023, About 11 months ago

It makes sense that some older landlords retire, but I'm not convinced about the comment, "While the tax and regulatory changes haven’t driven a buy-to-let sell off...".

You just have to read the many posts on here about landlords fed up with the tax changes, regulations etc to know it's not just older landlords getting out of the PRS.

JB

12:39 PM, 17th April 2023, About 11 months ago

Older' housing providers would probably stay until they were 'even older' if they weren't being so abused

Dino Saw

13:02 PM, 17th April 2023, About 11 months ago

As an “older” investor myself and investing since the 90’s I think it’s the new reforms, stamp duty etc that is putting people off. I certainly am not looking forward to the future so will not be investing anymore.
S21 going will cause a big headache… so am now transitioning everything so my child can take over it all… with the new reforms coming S21 going has lead me to serve notice on dubious tenants and increase number of inspection creating more cost to run properties… it’s the reforms not the age driving landlords away… Along with the government out to get as much as they can from investors..

Monty Bodkin

13:11 PM, 17th April 2023, About 11 months ago

https://www.property118.com/landlords-fear-the-scrapping-of-s21-and-are-selling-up/

The potential scrapping of section 21 worries a third of landlords and is a ‘driving force’ behind growing numbers selling up and leaving the private rented sector (PRS), a survey reveals.

Carol

13:11 PM, 17th April 2023, About 11 months ago

Our long term plan was to keep our BTL properties to supplement our pension. We are at retirement age after 20 years of being LL's (whilst still working) and have now sold 80% of our portfolio due to tax and legislation changes. No longer profitable and much higher risk of bankruptcy if we get a bad tenant. Have sold up when tenants have left but the remaining 20% soon to be issued with Section 21 whist it is still an option and before CGT wipes out any profit gained by our hard work and improvements. All properties at EPC C or above.

Sharon

15:14 PM, 17th April 2023, About 11 months ago

Reply to the comment left by John Harniman at 17/04/2023 - 13:02
Interested to know how you plan to transition your portfolio to your child. This is something I would like to do but not sure the best way to proceed

MarkT

15:36 PM, 17th April 2023, About 11 months ago

I have been a landlord of over 20 years and over the last 5 years have sold 24 of my properties and now have S21 served on the rest. Yes I may be nearing retirement age but that is NOT the reason . Its the tax and legislation that makes this sector unprofitable and just horrible to remain within . S21, S24, EPC limits, interest rates, Stamp duty and now the changes to capital gains. - oh what a surprise , rents are going up and available properties declining - who would have thought that would happen when you force private landlords out

Rod

17:12 PM, 17th April 2023, About 11 months ago

Scary that Hamptons think early 90's to now is only 2 decades - no wonder Rishi says we're innumerate and need double maths.

My understanding is that most landlords had probably intended to keep most of their portfolio beyond statutory pension age - perhaps selling one or two to fund some bucket list holidays, gift some to children who wanted to take on the responsibility. Any remaining property was planned to cover pensions, to be sold to cover care costs.

The Osborne years put paid to most landlords tax planning, with the slashing of the CGT relief on previous primary residence and higher CGT rates.
The return of interest rates to more normal levels has driven home the S24 stake, ending the plans of many to
enjoy a comfortable income by topping up their pension with their rental profits.

This combined with the seemingly endless stream of licencing schemes, legislative rule changes and the prospect of having to fund energy efficiency works while losing S21 to recover our properties is proving the final straw for many.

When better returns are available elsewhere for less risk, is it any wonder landlords are selling up?

Hopefully, they are able to take advantage of Mark's advice and will be taking a holiday of a lifetime while they do so.
https://www.property118.com/opportunities-uk-landlords-tax-efficient-time-out/

Whiteskifreak Surrey

17:58 PM, 17th April 2023, About 11 months ago

"Ms Beveridge said: “While the tax and regulatory changes haven’t driven a buy-to-let sell off, they have stemmed the next generation of landlords."
One would think the lady will be on the top what is happening in the PRS.
Clearly this is not the case.
Majority of exiting landlords simply had enough of being the enemy No. 1 of this country and constantly exposed to new idiotic regulations.
it is enough to read comments on property pages / articles. The war on landlords is the main reason for what is happening now.

northern landlord

18:09 PM, 17th April 2023, About 11 months ago

If an older landlord’s properties are paid for and everything is handled by a decent agent there is theoretically no need to retire from being a landlord, you can just retire like I did some years back and put the rent towards topping up your state and/or work pensions.
If I sell up, unless I need the money for some pressing reason it will probably just devalue and property still beats most low risk investments, a good reason to stay. However, my first rental property goes up for sale next week not because I am so worried about “tax or regulatory changes introduced since 2016 and the more recent higher interest rate environment.” What I fear is the regulatory changes that I know are coming and those that I fear will come. I don’t want my properties becoming a millstone around my neck. I want to be able sell them when I want to without let or hindrance. Contrary to popular belief most landlords are not rich and have worked for what they have got and I for one don’t want to potentially have to subsidise a tenant’s lifestyle at the expense of my own.

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