Landlords driving sales

The majority (73%) of landlord sales in 2022 were made by those reaching retirement, with many being early adopters of the first buy-to-let mortgages which launched in 1996, Hampton's research shows.

A further 96,000 landlords will turn 65 each coming year, which will likely mean that demographics will drive landlord sales to a new peak within the next five years.

As it stands the typical landlord is 60 years old, while almost one million (924,000) are already over the age of 65.

Aneisha Beveridge, head of research at Hamptons, said: “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.  The number of new purchases by landlords has remained relatively muted. Millennials, who have struggled to get onto the housing ladder, have not been in a position to afford or consider purchasing a buy-to-let too.  While house price growth continues to slow, rents keep moving in the opposite direction. Tenants find themselves with a little more choice than they did last year, which has been reflected in a 10% increase in the number of tenants moving home.  However, the number of rental homes on the market seems to have found a new normal at nearly two-thirds below pre-pandemic levels."

Changing Landscape of Buy-to-Let Mortgages

The purchases made by these landlords 15-25 years ago following the introduction of the buy-to-let mortgage still make up the majority of privately rented homes in Great Britain.

Just over half (51%) of today’s total number of outstanding buy-to-let mortgages were taken out between 1996 and 2007.

And it’s this cohort of ageing investors who bought when the sector was growing rapidly that are now increasingly likely to sell up and cash out.

They leave behind a gap which is not being filled by new landlords entering the sector.

Many of the first buy-to-let mortgages were used to purchase new low-rise city centre flats and it’s these flats which form the largest proportion of sales by today’s long-term landlords.

Suburban London tops the list with 60% of landlord sales in Redbridge having been owned for 15+ years, followed by 59% in Ealing, 58% in Harrow, 55% in Barnet and 53% in Enfield.

While age tends to be the primary trigger for selling up, in many cases the decision to sell has been compounded by lower-than-average returns, which in turn have been exacerbated by higher interest rates.  An investor who bought 20 years ago was achieving a gross yield of 4.3% relative to their sale price, compared to a landlord buying today who is achieving 6.1% (chart 3).  This implies that in many cases, these landlords are selling homes where long-term tenants were paying rents which have slipped below market rates.

Benefits of investing in the North East

In recent years, there has been a growing trend of property investors turning to the North East of England for opportunities, and for good reason. Here are some of the benefits of investing in the North East:

Affordability

The North East offers some of the most affordable property prices in the UK, making it an attractive option for investors looking for a high potential return on investment (ROI).

Strong rental demand

With a large student population and a growing number of professionals relocating to the region for work, there is strong rental demand in many parts of the North East. This translates into reliable rental income for landlords.

Regeneration

Several areas of the North East are undergoing regeneration, with significant investment in infrastructure and housing. This presents opportunities for investors to get in on the ground floor of areas that are poised for growth.

Diversification

Investing in the North East can provide diversification for investors who may have concentrated their portfolios in more expensive areas of the UK.

Potential for capital growth

While property prices in the North East may be lower than in other parts of the country, there is still potential for capital growth over the long term as the region continues to develop and attract investment.

Overall, investing in the North East of England can offer attractive opportunities for property investors looking to diversify their portfolios, achieve strong rental yields, and potentially benefit from capital growth. However, as with any investment, it is important to conduct thorough research and due diligence before making any decisions.