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Many landlords are leaving the UK property market and selling their properties due to retirement age, reveals latest survey analysis by estate agency Hamptons.

About 140,000 landlords retired last year, accounting for 73% of all sales by investors.

This trend is likely to continue, as almost one million landlords in the UK are already over the age of 65, and around 96,000 landlords are expected to turn 65 each year across the UK.

The average age of a landlord in the UK is 60, and many of these retirees were early adopters of the first buy to let mortgages, which were introduced back in 1996.

Head of Research at Hamptons, Aneisha Beveridge, states:

“Two decades on from the birth of buy-to-let mortgages in the late 1990s, early investors are starting to sell up.

“This means that demographics alone will push up the number of landlord sales over the next five years to reach a new peak. This was likely to happen irrespective of the tax or regulatory changes introduced since 2016 and the more recent higher interest rate environment.

“But while the tax and regulatory changes haven’t driven a buy-to-let sell off, they have stemmed the next generation of landlords.

“While house price growth continues to slow, rents keep moving in the opposite direction.”

Early adopters dominate the buy to let market

According to Hampton’s analysis, the majority of privately rented properties in the UK are still those that were acquired by landlords 15-25 years ago.

In fact, over half (51%) of the outstanding buy to let mortgages today were taken out between 1996 and 2007.

As this cohort of ageing investors bought when the sector was growing rapidly, they are now increasingly likely to sell up and cash out.

COO of property buying firm Upstix, Phil Tennant, says:

“The demographic pressures pushing landlord sales revealed by Hamptons’ Lettings Index are only going to increase as time goes on.

“Combined with new imperatives to sell from stricter energy efficiency requirements, more expensive buy-to-let mortgages and fewer tax incentives, we may be facing an exodus from the sector in the near future.”

Age being not the only factor

Retirement age is typically the primary factor that drives landlords to sell their properties, however, the decision to sell has been further fuelled by below average returns that have made worse by higher interest rates.

Those who invested in buy to let properties 20 years ago were able to achieve a gross yield of 4.3% relative to their sale price, while landlords who purchase properties today can earn a higher yield of 6.1%.

The UK property market is experiencing a significant shift as many landlords, particularly those who are older, are leaving the market and selling their properties due to retirement.

This trend is likely to continue, as many more landlords are approaching retirement age, and the returns on buy to let investments are not as high as they used to be.

This could potentially have a significant impact on the rental market in the UK, as many of these landlords have owned their properties for many years, their departure could result in a decrease of the supply of rental properties in certain areas. This could also lead to an increase in rental prices, particularly in areas where demand for rental properties is high.

New opportunities for new investors?

The retirement of landlords could provide opportunities for new investors to enter the market and acquire properties that previously were overly challenging for retiring landlords to manage.

Even though retirement of landlords could decrease the rental supply for tenants, it could also potentially increase the supply of rental properties that would be available to purchase in certain areas, thus creating new investment opportunities for those looking to invest in the property market.

Moreover, solicitor firm, Osbornes Law, recently reported that properties that have been previously owned by landlords, are being auctioned off, thus presenting an opportunity for potential new investors.

Simon Nosworthy, head of residential conveyancing at Osbornes Law, predicts that auctions will be filled with properties previously owned by landlords, as high interest rates are pushing people out of the market.

He said:

“Historically when mortgage rates rise some homeowners default on their mortgage and then these properties are generally sold at auction by the banks.

“As a result, we could well see an increase in the number of properties being sold at auction, in addition to landlords selling their housing stock in this way.”

This means that there may be an increase in the number of properties available for purchase at auction. To capitalise on this opportunity, if you are a landlord interested in purchasing auction properties, consider using bridging loan as a flexible and effective way to finance your investment.

With bridging loan, you can access funds quickly and easily, allowing you to act fast and secure your property before someone else does.

Contact our specialist advisors via telephone or live chat today to learn more!