New research from Rightmove shows almost a quarter of landlords are planning to sell at least one property from their current portfolio, despite substantial rent increases in some parts of the country.
When asked about future plans, almost a quarter of landlords say they are planning to sell at least one property from their portfolio: this is made up of some who say they will be decreasing their portfolio and others suggesting they will be selling all their rental properties.
The most common reasons given for selling are changes to legislation including recent tax relief changes and the ban on tenant fees leading to an increase in their costs for some.
The average landlord in the portal’s study rents out three properties, with a quarter of them owning just one. Almost a third are still planning to increase their portfolio, with the majority of those saying that property still delivers better returns than other investments.
Meanwhile separate data from Rightmove reveals record asking rents in all but two regions, amid a shortage of new stock for tenants to choose from.
Since 2016, landlords have seen the introduction of a stamp duty surcharge on second homes, a phasing of the reduction in tax relief and more recently the ban on tenant fees which some agents may be passing on in part to landlords.
There was a short-term flood of properties throughout 2016 and into 2017 caused by landlords who bought before the stamp duty surcharge but that stock has now dissipated and is currently 13 per cent lower than Q3 2015 before any of these changes came in.
Asking rents outside London are now at an all-time high of £828 per calendar month, pushed up by the biggest quarterly jump at this time of year since 2015, while the annual rate of price change rises to 3.2 per cent, an increase not seen since 2016.
Scotland and the North East are the only regional markets not to have seen record asking rents this quarter.
London, meanwhile, has seen the biggest quarterly jump in asking rents since Rightmove started recording this data back in 2012, leading to an annual rate of 5.6 per cent and a record average asking rent of £2,104 pcm.
Rightmove’s commercial director and housing market analyst Miles Shipside says: “There are a number of forces at play in the current rental market, all leading to record rents for tenants and fewer homes to choose from, yet demand remains strong.
“Worryingly for tenants there are signs that the stock shortage may worsen if some landlords follow through with their plans to sell up, though an increase in plans for build to rent properties may help to fill some of the gap. The overall feeling among those landlords who are planning to exit the market is one of frustration with many telling us that the tax changes mean it’s no longer financially attractive to keep their properties.
“Early data seems to point to some of the income lost through the removal of tenant fees being passed on to the tenant in higher rents, but it should still work out cheaper than paying the upfront admin fees as long as stock doesn’t constrict and rents don’t rise too much. What we really need now is more properties available to rent. Rising rents may tempt some landlords back in, but momentum is currently to downsize portfolios in spite of the prospect of increasing yields.”
In response to the Rightmove data, including the record rental prices, PropTech entrepreneur Neil Cobbold - chief operating officer of automated lettings payment system PayProp - describes the situation as “a perfect storm.”
He says: “The tenant fees ban, continued uncertainty surrounding Brexit and rising demand due to lower stock levels have all contributed. In the circumstances, it's reasonable to expect rents to increase further in Q4.”
Cobbold believes that this continuing rental growth is good news for agents and landlords, which in the short term improves their finances and in the longer term underlines the financial benefits of letting property.
“Moreover, rising demand means agents can promise lower void periods as eager renters snap up properties faster” he says.