Landlords turn to auctions to dispose of buy-to-let properties quickly
Around 38% of current properties which have been put up for auction come from buy-to-let investors who are looking to exit the market quickly.
Analysis from My Auction found that landlords were willing to sell properties for up to 25-30% less than the investment might have sold for before, just to get out of the market.
The company said landlords with cash were benefitting the most because they do not rely on mortgage rate increases and are therefore able to make lower offers on these properties.
My Auction said for landlords looking to buy properties at auction, the rise in returns meant an 8% yield could equate to a 25% reduction of the property’s value compared to this time last year.
Sought after properties
The company found that in the last few months, the most common type of property in demand was two-bedroom flats, generating interest from 40% of buyers. This was followed by two or three-bed houses taking a 30% share of bidder interest, while one-bedroom flats came in at 15%.
Some 15% of investment purchases have been houses of multiple occupation (HMO). My Auction said despite being harder to manage, HMOs were in demand due to the properties generating average returns of 8%.
Stuart Collar-Brown, 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.
“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.
He added: “Investors in London are looking for rental yields around 7-8% now, compared to 5-6% pre-pandemic, so those looking to exit the market are having to be far more realistic with their expectations compared with the peak of the market in August/September 2022.”