As tenants struggle to find suitable and affordable properties to rent, the number of landlords is declining as many are choosing to sell up. We take a look at the situation and some of the reasons why landlords are deciding to exit the rental property sector.
A range of events has caused landlords to reconsider their options and in 2022, around 35,000 more rental properties were sold than were purchased. With a smaller pool of properties, remaining landlords have been able to raise rents, with tenants not only finding it hard to find a property but also to afford one.
Rising interest rates
Buy-to-let mortgage rates have risen substantially since the mini-budget of September 2022. Already higher than ordinary residential mortgages, they are now causing landlords to consider their positions, particularly as fixed-rate deals come to an end.
Landlords retiring
Hamptons Estate Agents has estimated that in 2022 around 140,000 people who purchased investment properties in the 1990s sold up to pay for their retirement. It anticipates that more will follow and says that new landlords are not joining the rental sector. One reason is that younger people simply do have the funds to buy property to let.
As well as age, Hamptons said that lower returns on investments, the general state of the economy and tax and regulatory changes were also factors for landlords selling up.
The end of no-fault eviction and other new rules
The government has proposed ending no-fault evictions, which could cause difficulties for landlords. A large number rely on being able to evict tenants when they want to and have control over who they have in their property. Housing charity Shelter reported last year that nearly 230,000 no-fault eviction notices had been served on tenants since April 2019.
Tenants will also have more rights, including the right to ask to keep a pet, which cannot be unreasonably refused, and the right not to be turned away because they are a family with children or on benefits.
Work needed to meet new energy efficiency standards
Landlords may also have to carry out work to improve energy efficiency at their properties. They are no longer to rent property out if it has an EPC rating of F or G, the lowest energy ratings, unless they have an exemption. Substantial penalties can be levied for failure to comply.
As of 1 April 2027, it is intended that properties for rent will need an EPC rating of C or above and, from 2030, a rating of B or above. Mortgage lenders will also be required to have an average rating of C or above across their lending portfolios, meaning loans against lower-rated properties are likely to be harder to find and more expensive.
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