Latest UpdatesOpinionResidential PropertyUnited Kingdom

Record Number of Landlords to Abandon UK Rental Market

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David Hannah, Group Chairman of Cornerstone Tax, explains why the UK’s Buy-to-Let mortgage market isn’t working for tenants or landlords.
  
According to the latest data from Cornerstone Tax, 15 per cent of landlords are considering selling up due to rising costs associated with their property. Our finding is supported by The Hamptons Monthly Letting Index which reports UK landlords are collectively paying £15bn in mortgage interest annually – up by £4.3bn over the last 12 months (or a 40% increase).

Key stats

  • 15% of landlords say that they are selling up due to rising costs associated with their property
  • 20% of landlords became one without the sufficient knowledge needed and have lost thousands as a result
  • 24% of landlords say that their biggest mental health strain is managing their tenants
  • 19% of tenants have had to change rental properties five times in less than five years through no fault of their own
  • 17% of tenants say that they have lost out on a property that they wanted to rent in the last two years due to a bidding war

The Bank of England’s long battle with inflation beginning in December 2021 has pushed interest rates up from near zero to a historic high of 5.25% as of last month, this has had a particular impact on landlords that took our mortgages on buy-to-let schemes during the era of low interest rates in the 2010s under the assumption that their property would be a safe investment. Further, our data suggests a staggering 20% of landlords became lack the knowledge required to operate profitably and have lost thousands as a result, with average estimates as high as £7,500 in 2023 alone. 

A record number of landlords leaving the rental market is contributing to serious problems of supply and demand within the UK’s major cities.

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A record number of landlords leaving the rental market is contributing to serious problems of supply and demand within the UK’s major cities. Cornerstone’s research reveals that 19% of tenants have had to change rental properties five times in less than five years through no fault of their own as landlords are forced to either exit the market or pass on these record high mortgage costs onto their tenants. Moreover, as demand continues to outstrip supply within the market, 17% of tenants have also admitted that they have lost out on a property that they wanted to rent in the last two years due to a bidding war. 
 
Notwithstanding, hope may be on the horizon for current renters. 2023 witnessed some of the sharpest falls in house prices in over fourteen years, whilst the BoE’s decision to pause interest hikes has allowed the mortgage market to stabilise. A majority of the UK’s largest mortgage lenders have also started slashing their rates for first time buyers in anticipation of an interest rate cut, with Halifax offering five-year fixed rate mortgages at less than 5%. These figures should therefore provide some comfort for those looking to escape an overheated rental market besot by the exit of a record number of landlords.

The cause of UK rental market woes may be attributed to many landlords taking out mortgages on buy-to-let schemes during a period of sustained low interest rates, however. Fast-forward to 2024, and the pressure they face is simply too much. Spiralling interest rates and the highest tax burden since the second world war have forced thousands of landlords to sell up, which then puts further pressure on renters due to a lack of stock.

Spiralling interest rates and the highest tax burden since the second world war have forced thousands of landlords to sell up, which then puts further pressure on renters due to a lack of stock.

David Hannah

David Hannah ACA, CTA, is the Founder and Chairman of Cornerstone Tax, a specialist UK tax boutique dedicated to providing advice to property buyers on their various tax liabilities.

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  • David Hannah

    David Hannah ACA, CTA, is the Founder and Chairman of Cornerstone Tax, a specialist UK tax boutique dedicated to providing advice to property buyers on their various tax liabilities.

    View all Articles

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