London's Buy-to-Let Market Hits 10-Year High as Landlords Exit
London's buy-to-let property sales reach a decade-high as landlords exit due to tax concerns and regulatory changes. The trend impacts rental availability and landlord income across Britain.
The London property market is experiencing a significant shift as the number of buy-to-let properties for sale reaches a 10-year peak. This trend is primarily driven by landlords exiting the market due to anticipated changes in capital gains tax (CGT) and other regulatory pressures.
According to data from analytics firm TwentyCi, 22% of newly listed homes for sale in London this July had been available for rent in the past decade. This marks a substantial increase from 15.6% in July 2023 and 12.9% in July 2019. The national average stands at just 9%, highlighting London's unique position in this trend.
Several factors are contributing to this exodus of landlords from the buy-to-let sector:
- Higher mortgage rates
- Increased regulatory requirements
- Potential tax reforms, including speculation about CGT alignment with income tax
Colin Bradshaw of TwentyCi points out that landlords are particularly concerned about a possible increase in CGT and the requirement to improve properties' energy efficiency ratings to grade "C" by 2030. He notes, "Overall, the rental sector has become much more expensive and unpredictable for landlords over the last decade."
The impact of this trend extends beyond London. Across Britain, the number of available rental properties has dropped significantly, from 369,000 in 2019 to 276,000 in July 2024 - a decrease of over 25%. This figure represents the lowest level since TwentyCi began recording data 15 years ago.
HM Revenue & Customs data further illustrates the challenges faced by landlords. Income from private landlords fell by 4% from £49.4bn in 2020-21 to £47.4bn for 2022-23. London experienced one of the most significant declines, with a 12.5% drop in landlord income.
Chris Norrie of the National Residential Landlords Association provides insight into the landlords' perspective: "It's incredibly challenging for landlords at the moment. A combination of government tax changes and higher mortgage rates has made it very difficult for landlords to break even."
The situation raises concerns about the future of the rental market. As more landlords consider selling their properties, the already strained rental housing supply could face further pressure. This trend could potentially worsen the rental crisis, affecting both landlords and tenants.
"It's not a good thing for renters if landlords leave. We don't have enough rental housing supply already. Demand is increasing but landlords are selling quicker than they're buying. This is a perfect storm."
It's worth noting that the buy-to-let market in the UK has undergone significant changes since its inception in 1996. The sector has faced numerous regulatory and tax changes, including the introduction of a 3% stamp duty surcharge on second homes and buy-to-let properties in 2016, and the phasing out of mortgage interest tax relief for landlords between 2017 and 2020.
As the situation continues to evolve, both landlords and policymakers will need to address the challenges facing the rental market to ensure a balanced and sustainable housing ecosystem for all stakeholders involved.
