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Retiring Landlords Drive Buy-to-Let Exodus

retiring landlords - buy-to-let

Retiring landlords accounted for almost three quarters of buy-to-let sales last year, as early investors who adopted the first dedicated buy-to-let mortgages back in the late 1990s sold up to fund their retirements.

Research by estate agents Hamptons found that an estimated 140,000 landlords retired in 2022, accounting for almost three-quarters of all landlord sales. 

With approximately 924,000 landlords already over the age of 65 and more than half of today’s outstanding buy-to-let mortgages taken out between 1996 and 2007, it is expected that the number of sales by retirees will peak over the next five years. Approximately 96,000 investors are set to reach age 65 annually during this period. 

But while landlord sales are primarily being driven by older investors leaving the market, researchers noted that this has also been compounded by falling returns on many long-term investments where rates have slipped below the market rate – something further exacerbated by soaring interest rates driving up mortgage costs and further squeezing landlord profits. 

With retiring landlords quitting the market, it also seems they are not being replaced by new investors. For younger generations, the combination of record house prices and unaffordable mortgages has placed buy-to-let firmly out of reach. For many, even getting onto the property ladder has become unobtainable.

Now, it is feared this situation will lead to an ever greater shortage of rental properties – something which is already a huge problem across the country. Although more new rental properties are coming onto the market than they were last year, they are not doing so in anywhere near enough numbers to keep up with the pace of demand. The latest figures show that there are 64% less homes currently available on the rental market compared to four years ago, despite availability increasing by 13% on the lows seen in 2022.

Shortages Fuel Rental Growth

Given this situation, rents across the country continue to soar despite a slowing of house price growth. Last month, average rental prices reached £1,236 per month – a 10.8% year-on-year increase, and the second consecutive double-digit rise despite only three being recorded in total since 2014. 

In the 12 months to March 2023, annual rental growth was fastest in London (16.2%) followed by Scotland (10.7%), the North (9.8%), the Midlands (9.1%) and the South East (8.6%). Nationally, the Hamptons Lettings Index showed growth of 10.8%, on average, equating to an increase of £121.

Buy-to-Let In 2023

Although rents continue to increase and demand soars, traditional buy-to-let has become a somewhat tricky proposition over the last few years. Greatly increased mortgage costs driven by a series of interest rate rises, plus ever-more stringent legislation and increased taxation have all combined to severely dent buy-to-let profitability.

Considering this, it’s perhaps little wonder that retiring landlords are concluding buy-to-let is no longer worth it.

If you’re a landlord nearing retirement age, should you sell up like so many before you? As ever, the answer really depends on your individual circumstances – but it’s certainly worthwhile to look at your options and weigh up the best route forward.

What about buy-to-let alternatives? 

Many investors are waking up to the fact you don’t need to purchase or take direct ownership of property assets to generate an income. For example, indirect investment means such as property portfolios are proving popular with many because they offer regular returns without many of the drawbacks of being a landlord, including the aforementioned profit squeeze fuelled by higher mortgage repayments and the worry of rising ongoing maintenance costs. 

For more information on property investment and buy-to-let in 2023, please don’t hesitate to get in touch with our team by calling us or reaching out using our contact form.

Important note: The information provided in this article is general in nature and does not constitute personal financial advice. If you are unsure whether an investment is right for you, please seek professional advice. If you choose to invest, the value of your investment can both rise and fall so you may get back less than you put in.