Nearly 150,000 buy-to-let landlords retire from the market with more expected
Around 140,000 landlords retired from the market last year, which accounted for nearly three quarters of all landlord sales, with that figure expected to grow over the next few years as older landlords retire.
According to estate agents Hamptons, there are 96,000 landlords turning 65 each year and there are around one million landlords who are above the age of 65 currently.
The report continued that these landlords who retired last year were the among the first to take buy-to-let mortgages when they came to the market in 1996.
Hamptons added that over the last 12 years, the number of landlords retiring annually has nearly doubled, from nearly 80,000 in 2010 to around 140,000 in 2022.
The report said that over half of the total number of outstanding buy-to-let mortgages were taken out between 1996 and 2007.
It explained that this “cohort of ageing investors” who bought when the sector was growing were “increasingly likely to sell up and cash out”.
“They leave behind a gap which is not being filled by new landlords entering the sector,” it added.
Hamptons said that 45% of homes sold by landlords so far this year was bought as least 15 years ago, which is up from a third in 2018 and has been growing ever since.
The estate agents said that age could be the “primary trigger” for selling, but other factors could be lower-than-average-returns, which has been worsened by higher interest rates.
An investor who bought 20 years ago could achieve a gross yield of 4.3% relative to the sale price, as opposed to 6.1% for a landlord today.
“This implies that in many cases, these landlords are selling homes where long-term tenants were paying rents which have slipped below market rates,” it added.
Rental growth hits double digits
Hamptons said that rental growth posted its third ever double-digit increase since the Hamptons Lettings Index started in 2014.
Double digit growth was reported in May 2022, February 2023 and March 2023.
In March, the average rent for a newly-let home reached £1,236 per month, which is 10.8% higher than the same period last year.
This is the second fastest increase of any month after the 11.5% increase in May 2022.
Average rents in London jumped by 16.2%, rising to 18.5% in Inner London. Outer London reported 15.6% growth, the fastest annual increase on record.
The number of homes in the rental market is 14% above last year’s figure, which was a record low. There are 64% fewer homes available to rent compared to March 2019.
Scotland has the lowest rental stock shortage, with homes on the market down 39% year-on-year.
Millennials not joining buy-to-let market
Aneisha Beveridge, head of research at Hamptons, said: “Two decades on from the birth of buy-to-let mortgages in the late 1990s, early investors are starting to sell up. This means that demographics alone will push up the number of landlord sales over the next five years to reach a new peak. This was likely to happen irrespective of the tax or regulatory changes introduced since 2016 and the more recent higher interest rate environment.”
She added that while tax and regulatory changes had driven the buy-to-let sell off, they had “stemmed the next generation of landlords”.
“The number of new purchases by landlords has remained relatively muted. Millennials, who have struggled to get onto the housing ladder, have not been in a position to afford or consider purchasing a buy-to-let too,” Beveridge noted.
“While house price growth continues to slow, rents keep moving in the opposite direction. Tenants find themselves with a little more choice than they did last year, which has been reflected in a 10 per cent increase in the number of tenants moving home.
“However, the number of rental homes on the market seems to have found a new normal at nearly two-thirds below pre-pandemic levels,” she explained.