The number of former rental properties for sale has hit record levels, new data has revealed. According to the research, 18 per cent of all homes currently listed for sale were once available to rent, compared to just 8 per cent in 2010, suggesting that more and more landlords are exiting the sector by selling off their rental portfolios.
This shift could be partly driven by the anticipated increase in Capital Gains Tax (CGT) in the forthcoming Autumn Statement on 30th October, which has landlords concerned about the impact on their profits. The research authors suggest the prospect of higher CGT may be pushing more landlords to sell their properties before the potential changes take effect.
London rental properties most affected
London has become a hotspot for this trend, with nearly a third (29%) of residential properties for sale once being rental properties. Scotland and the North East follow London, with both regions seeing 19 per cent of their property listings moving from rental to sales.
Despite these figures, the five-year average for properties making this transition across Great Britain sits at 14 per cent, indicating that the current surge is part of a long-term trend rather than a sudden exodus of landlords.
The overall number of properties coming onto the market for sale has also risen by 14 per cent compared to the same period last year, buoyed by the recent bank rate cut, which has encouraged more sellers to list their investments. However, when compared to pre-pandemic figures from 2019, the increase is a more modest 3 per cent, showing that the market is still stabilising after a turbulent few years.
Incentives needed for landlords to stay
The tightening supply of rental homes, coupled with high demand, has already led to rising rents, meaning further exits by landlords could exacerbate the issue.
Tim Bannister, property expert at Rightmove, which conducted the research, warns that tenants could suffer if more landlords decide to sell: “A healthy private rented sector needs landlord investment to provide tenants with a good choice of homes. We’ve seen over the last few years how the supply and demand imbalance can contribute to rising rents, so there is a worry that without encouragement for landlords to stay in rather than leave the rental sector, it is tenants who will pay the price.”
Despite the trend, Bannister remains cautiously optimistic, suggesting that the properties being sold may offer opportunities for first-time buyers or even be purchased by new landlords, explaining: “It doesn’t appear to be a mass exodus…these homes could provide first-time buyers with more choice. They might also be purchased by other landlords and put back into the rental market, which would signal a changing of the guard rather than a complete exit from landlords.”
Marc von Grundherr, Director of Benham and Reeves in London, believes the mooted CGT changes could be a tipping point for some landlords but argues that the sector remains resilient. He states: “If the Labour government was to follow through with it [the CGT increase], it could make for a significant increase in the tax paid by the average landlord…Despite this, we’re simply not seeing the exodus of landlords that is so often reported, as buy-to-let remains a strong investment.”
As the Autumn Statement approaches, all eyes will be on the government’s next move and whether it will offer any relief or incentives to encourage landlords to stay in the rental market. Without such measures, the current trend could worsen, leading to higher rents and fewer options for tenants across the UK.
The latest data points to an ongoing shift in the property market as landlords reassess their positions amidst rising taxes, legislation and costs. For investors, the outlook will largely depend on government policy in the coming months, as well as how the market responds to these pressures. What remains clear is that the future of the UK rental sector is at a crucial turning point.
