PRS faces crisis as just one-in-five landlords plan to remain

A looming shortage of rental properties threatens the private rented sector as a significant portion of landlords prepare to offload their investments, a study reveals.

The news comes just a day after the peer Lord John Bird claimed that fears of a landlord exodus are ‘unfounded’.

According to a study by Pegasus Insight, 37% of landlords intending to sell within the next year – and just 22% of landlords are planning to remain indefinitely.

It also found that 28% of the rental homes sold remained in the PRS.

The firm’s Landlord Trends report points to a sharp rise in divestment intentions compared to three years ago, when just 20% planned to sell.

Large number of disillusioned landlords

Pegasus’ founder and director, Mark Long, said: “These results suggest a large cohort of disillusioned landlords, worried about the future of the sector and further demands the government might place on them.

“Our research confirms that many landlords are deeply concerned about the impact of the Renters’ Rights Bill, energy efficiency requirements and a potential hike in Capital Gains Tax on buy to let property.

“The fact that so many feel impelled to sell up despite the underlying health of this market is particularly galling.”

He adds: “A proportion of the intended sales will be down to selective pruning by larger landlords, and some of the divested property will be hoovered up by other landlords.

“But there’s no doubt that the volume of stock in the PRS will reduce in the next 12 months.”

He warns that strong tenant demand will push up rents and the government must now do something to help landlords remain in the PRS.

Landlord investment appetite plummets

Meanwhile, landlord interest in expanding portfolios has plummeted from 18% to just 6%.

The survey found that 22% of landlords have sold a property in the past 12 months, compared to just 6% who purchased one.

Highly leveraged landlords, particularly those with four or more buy to let mortgages, are the most active, with 31% selling and 11% buying in the last year.

Landlords sell to owner-occupiers

However, only 28% of sold properties remained in the PRS, with 67% acquired by owner-occupiers, including 31% by first-time buyers.

This trend suggests there will be a big reduction in available rental stock.

Despite robust tenant demand — 73% of landlords report strong or very strong interest in their properties — and a steady average rental yield of 6.3%.

More than half (58%) of landlords have a clear exit strategy, and 39% anticipate leaving the market within five years.