A growing number of landlords have sold up as rates for mortgages rise in line with data that revealed tenants faced with sharply increasing rents in a tight housing market.

The estimates of an estate agent, Savills, found that 25,000 homes within the UK were let by landlords in April and May. This was compared to 22,000 homes sold in the preceding two months.

The selling-off has increased in pace since the time of the Covid pandemic. Landlords began to feel the pain of rising costs and high interest rates. This led to new buy-to-let mortgages, particularly interest-only loans – more costly to pay back.

The official figures of HM Revenue and Customs – using data on capital gains tax revealed that the owners of landlords bought 153,000 homes between 2021 and 22 February, 8.5% more than initially estimated.

Savills claimed that the figures indicated “an increase in buy-to-let landlords selling properties in the past two years, and the potential for properties to be leaving the sector.”

This is in spite of a decline in property prices. Based on separate data released with the estate agency Hamptons International, investors who had a property for sale in 2023 following having owned it for 11 years, made an average of PS94,800 higher than what they initially paid on the house. This figure was 10.1 percent lower than the record-setting average of PS105,300 in the previous year.

As the virus spread, portions of the market for property came to a halt because the lockdowns slowed down viewings and led to economic uncertainty.

Toby Parsloe, a research analyst at Savills Toby Parsloe, a research analyst at Savills, told us: “The rise in residential disposals within the tax on capital gains could point towards a higher proportion of buy-to-let landlords who are selling their properties. The data also suggest that this trend began earlier than originally thought but has picked up speed after the market reopened in June of 2020 following the initial Covid lockdown.

“We know mortgaged buy-to-let landlords have been hit by the double whammy of higher mortgage interest rates since the mini-budget and also the end of mortgage interest relief since 2020, which has reduced profitability to its lowest level since 2007.”

Although it wasn’t clear whether the properties were given to landlords who have not been able to rent them out or reinvested in other properties or if they had been removed from the rental market entirely, Parsloe said: “With more landlords expected to come off fixed rates in the coming months, there is a very real risk that more will be looking to exit the sector.”

The rising trend has placed further pressure on rents across England, Scotland and Wales. New tenancy increased by 9.9 percent, which is PS116 – to PS1,282 per month during the month of July. This was the second month when rents increased annually at more than 5 percent, according to Hamptons.

“This prolonged period of growth leaves the average rent 28% higher than in February 2020, on the eve of the pandemic,” the estate agent stated.

The problem is that Hamptons said it’s likely that landlords would not want to market their homes for less than what they originally paid, which suggests that the sale may be a ceiling. A mere 6 percent of landlords have been able to sell their properties for a loss through 2023. Although this was slightly more than the 5% number which was recorded in the previous year, the figure was still better that the ten percent that were sold for loss in the year 2020.

The article was updated 15 August 2023, due to an earlier version, due to an oversight in the quote by Savills in the quote, stated that the market opening “in June 2021”. It should have read “June 2020”.

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