Concerns Raised of a Possible Private Rental Property Drought on the Horizon

Experts recently predicted that the UK could well be on its way to another huge boom for the private rental sector. With average property prices hovering at all-time highs, more prospective first-time buyers than ever before are finding themselves priced entirely out of the market.

Subsequently, some believe that a lack of affordability will inevitably trigger a surge in demand for private rental properties over the coming months.

Elsewhere, the evidence suggests that quite the opposite could be on the horizon. Motivated by stricter rules and higher taxes, older landlords are selling up and leaving the market entirely. Many of them are not being replaced by new landlords, which could lead to a serious drought for the private rental sector.

According to newly published data from the Nottingham Building Society, around a third of all landlords, approximately 1 million, plan to reconsider their portfolios within the next year. Among them, those planning to exit the sector entirely vastly outnumber those looking to purchase new properties.

While at least 16% of landlords indicated their intent to expand their portfolios, more than 20% said they would most likely be selling up.

Consequently, this could lead to a shortage of homes available on the private rental market. Something that could prove problematic for those unable to get on the property ladder due to skyrocketing house prices in most regions of the UK.

Many landlords feel victimised by new restrictions

A study conducted by the University of York in conjunction with the Nationwide Foundation found that buy-to-let mortgage activity has been on the decline for several years. Specifically, mortgage application volumes were down approximately 30% between 2014–15 and 2018–19.

Many landlords have spoken out, indicating feelings of victimisation, having faced elevated tax obligations and heavier general restrictions as of late. In turn, some are finding the prospect of maintaining their portfolios too much hassle to justify the income generated.

“Letting property look altogether different to landlords now: it is a riskier proposition, delivering a lower level of return and with a lot more hassle,” commented Dr Julie Rugg, lead author of the report.

“As one landlord said to me, ‘stocks and shares may not deliver the same level of return, but they don’t call me on a Sunday morning because the boiler’s bust’”.

Commenting on behalf of Nottingham, head of mortgage operations Denise Wells said that while there is still money to be made, the buy-to-let sector is not proving to be the goldmine it once was.

“Our research suggests sellers currently outnumber buyers in the buy-to-let market, with regulatory issues and tax changes among the reasons persuading landlords to pull out of the market,” she said.

“It remains the case that there are potentially strong returns to be earned in the buy-to-let market, and we continue to see landlords buying rental properties while our research indicates that many more potential landlords are considering going into the market too.”

The report published by Nottingham indicated that the main motivations for landlords planning to sell were the current regulatory environment (52%), followed by personal circumstances (41%), reduced tax benefits (24%), and problems with tenants during the Coronavirus crisis (21%).