11:18 AM, 21st February 2023, About 9 months ago 4
One property auction firm says that more than a third (38%) of their current lots are from buy-to-let investors looking to get out of the market quickly.
And it claims that some landlords are willing to take a hit of up to 30% on the property’s price just to leave the private rented sector.
Online property specialists My Auction points to high interest rates and the cost-of-living crisis hitting rental yields as being the main reasons for the increase in sell-offs.
The firm also says that yields are at a 14-year low with landlord mortgage payments exceeding rental incomes – leading to many squeezed BTL sellers to offload properties that don’t deliver returns.
Stuart Collar-Brown, the co-founder and director of My Auction, said: “The interest rate rises have solidified and sped up the mass exodus of buy-to-let investors from the market.
“However, other contributing factors, such as the consistent changes in legislation and taxation surrounding landlords in this section of the market, have made it almost unviable for some landlords to retain their investment properties.”
He added: “Landlords who are cash rich have the added benefit of not being reliant on mortgage rate increases, so we are seeing many making lower offers due to their ability to transact very quickly in a falling market.
“The expectation of landlords coming into the market now in terms of yield, has increased with many expecting a minimum of 8% which could equate to a reduction of as much as 25% compared with values this time last year.”
He says that investors in London are looking for rental yields of around 7-8%, compared to 5-6% pre-pandemic.
But sellers need to be realistic with their expectations compared with the peak of the market in August/September 2022.
My Auction says that the reason for leaving the BTL market is not solely down to profit margins.
It says that tax and legislation changes have made it difficult for some landlords to retain their investment properties – regardless of the exponential yields.
Over the last few months, the firm says that the most common type of property being sought by investors are two-bedroom flats (40%), followed by two/three bed houses (30%) and one-bedroom flats (15%).
Also, 15% of investment purchases have been HMOs – despite often being more difficult to manage they remain popular because they can offer returns of around 8%.
The market analysis shows that landlords with cash to buy will be the biggest winners in the current market.
The firm says that some landlords are willing to sell their investment property for up to 25-30% less than they might have sold for before because they want to get out of the market quickly.
In addition, investment buyers are looking to achieve a rental yield of at least 8% for a property to be considered an attractive purchase.