Lower Returns for Landlords Selling Properties
Research conducted by Hamptons has revealed that landlords who sold their buy-to-let properties this year experienced a notable decline in profits compared to the previous year. The capital gains earned by these investors dropped by 10.1%, with the average profit falling from £105,300 to £94,800.
Regional Disparities in Profitability
The most significant disparity was observed in the North East of England, where landlords made only £22,000 this year. This represents a considerable 15.7% decline from the £26,400 earned last year.
Shifts in the Market Landscape
Aneisha Beveridge, Hamptons’ Head of Research, pointed out that declining house prices indicate that current selling landlords might have missed the market’s peak. However, the record-breaking growth in rental prices provides some solace to landlords, gradually balancing the financial equation for them.
Impact on the Rental Market and Government Revenue
Beveridge further stated that a combination of lower house prices and rising rents is likely to support the rental market, as landlords hold back on selling. On the other hand, this trend may lead to reduced capital gains tax receipts for the government from landlords selling their properties over the next few years.
Losses Incurred by Some Landlords
The study also revealed that a fraction of landlords in England and Wales faced losses, with 6% selling their buy-to-let properties for less than their original purchase price. This percentage increased from 5% in the previous year. Moreover, 19% of investors selling flats and 22% in the North East sold their properties at a loss.
Rental Market Dynamics
The rental market continues to show strength, with rents across Great Britain rising by 9.9% compared to the previous year. This trend has continued for the past 27 months, with rental growth consistently surpassing the 5% mark.
Outlook for Landlords
Beveridge emphasized that with approximately 35,000 landlords transitioning from fixed-rate mortgages each month, upward cost pressures for landlords persist. As they approach remortgaging, landlords are seeking a balance by reducing debt and increasing rents that have fallen below market rates.
Regional House Price Trends
Over the past seven years, Northern England has experienced the most significant house price increase, while parts of London and the South East have seen stagnant prices. Despite this, London landlords still achieved the highest gross capital gains in cash terms, totaling £308,500 this year. However, this figure is down 3.4% from £319,300 last year and 15% from the peak of £365,000 in 2016 due to slower price growth.