Landlord exits highest in London and South East amid rising costs
Data reveals landlords are leaving the private rental sector most in London and the South East, driven by high property prices, lower yields and increased mortgage costs, according to research by Hamptons.
Landlord departures from the private rental sector are currently concentrated in London and the South of England, with the greatest pressure on investor returns in these high-cost markets. This trend is highlighted by lettings agency Hamptons, which has analysed recent sales data to understand where landlords are most likely to sell their rental properties.
In London, 20.3% of homes listed for sale in June had been let within the previous five years, more than twice the proportion recorded in the South East, where 9.5% of homes listed for sale were formerly rented. This indicates a significant exodus of landlords from these areas compared to other regions.
Regional differences in landlord sales and yields
The data shows that while landlord sales have fallen most sharply in northern markets, these areas continue to offer stronger rental yields. This resilience in buy-to-let returns means landlords in northern regions are less pressured to sell, as their investments remain more profitable despite broader market challenges.
Conversely, landlords in London and the South East face higher property prices and mortgage costs that squeeze yields and reduce profitability. These factors have contributed to a greater number of landlords exiting the sector in these regions, as maintaining rental portfolios becomes less financially viable.
Aneisha Beveridge, head of research at Hamptons, commented on the impact of recent regulatory and financial changes: “The Renters Rights Act has been a long time coming, and most landlords who wanted to leave the sector because of it have probably already done so. While the new rules may have encouraged some landlords to sell, the bigger shift has come from years of tax changes and higher mortgage costs, which have gradually reduced the number of landlords in the market.”
Impact of the Renters Rights Act and market conditions
The Renters Rights Act, which introduced a 12-month re-letting ban among other measures, has complicated the sales process for landlords. Beveridge noted that the prospect of holding an empty property that cannot be easily re-let has made some landlords reconsider selling, opting instead to retain their investments despite financial pressures.
Recent rental market trends offer some optimism for landlords who have chosen to stay. Yields have improved as rents have risen faster than house prices in the past couple of years, providing landlords with more capacity to absorb higher borrowing costs. Additionally, rental growth is accelerating, with rents on newly let homes increasing at their fastest rate in over a year.
These developments suggest that conditions for landlords may be improving compared to 12 months ago, though challenges remain. The balance of risk and reward is shifting, and landlords must carefully assess their portfolios in light of these changes.
Context of landlord exits and rental market evolution
Landlord exits from the private rental sector have been influenced by a combination of regulatory reforms, taxation changes and economic factors. The Renters Rights Act represents a significant regulatory milestone, aiming to strengthen tenant protections but also imposing new constraints on landlords.
Alongside this, years of tax adjustments, such as reductions in mortgage interest relief and increased capital gains tax liabilities, have eroded some of the financial incentives for private landlords. The rising cost of borrowing, linked to broader economic conditions, further pressures returns, especially in higher-value markets.
These factors have collectively contributed to a gradual decline in the number of landlords, particularly in areas with high property prices and lower rental yields. The northern regions, with comparatively stronger yields, have seen less pronounced exits, highlighting the regional disparities in the rental market.
Practical implications for landlords and letting agents
For landlords with properties in London and the South East, the data underscores the importance of reviewing portfolio performance regularly. Higher costs and regulatory complexity mean that maintaining profitability requires careful management of rental income, mortgage arrangements and compliance obligations.
Letting agents operating in these markets should be prepared to advise clients on the evolving risk profile of buy-to-let investments. Understanding the impact of the Renters Rights Act, particularly the re-letting restrictions, is essential for managing expectations around property sales and tenant transitions.
Landlords considering selling must also factor in the potential difficulties of navigating a tougher sales market and the implications of leaving properties empty for extended periods. Conversely, those choosing to hold may benefit from recent rental growth trends, but should monitor market developments closely.
Uncertainties and areas to monitor
While rental yields have improved recently, it remains uncertain how sustained this trend will be amid ongoing economic fluctuations. Changes to interest rates, inflation, and government policy could all influence the viability of buy-to-let investments going forward.
The full impact of the Renters Rights Act is still unfolding, particularly regarding the practical enforcement of the re-letting ban and other tenant protections. Landlords and agents should stay informed about any amendments or guidance updates that could affect compliance and operational procedures.
Regional housing market dynamics also warrant attention, as shifts in demand, supply and local regulations may alter the attractiveness of different areas for landlords. The evolving balance between sales and retention strategies will likely continue to vary across the country.
What landlords should consider now
- Review portfolio profitability in light of rising costs and regulatory changes, especially in high-value areas.
- Ensure compliance with the Renters Rights Act, including understanding the implications of the 12-month re-letting ban.
- Monitor rental market trends and local conditions to identify opportunities for rent increases or portfolio adjustments.
- Plan for potential challenges in selling rental properties, including longer vacancy periods and market uncertainty.
- Seek professional advice on tax, finance and legal matters to optimise investment strategies under current rules.
Supporting landlords through changing regulations
The Landlord Association (TLA) offers members access to a range of compliance resources and practical information tailored to the evolving rental sector. TLA’s new property management and compliance platform, ORBIT, currently in BETA testing, is designed to help landlords and letting agents organise property records, manage rental documents and keep track of key compliance actions.
ORBIT aims to simplify the administrative burden associated with new regulations such as the Renters Rights Act. Features in testing include document management and recording of repairs, inspections and communications, which are crucial for demonstrating compliance and managing tenant relations effectively.
Membership also provides access to up-to-date guidance and support on tenancy law changes, possession procedures and safety obligations, helping landlords adapt to the shifting regulatory environment. Exploring TLA membership and ORBIT BETA access can be valuable steps for landlords seeking to maintain compliance and optimise portfolio management amid ongoing sector reforms.
Looking ahead, landlords will need to remain agile as the rental market continues to respond to economic pressures and legislative changes. Staying informed and prepared will be key to sustaining rental income and managing risks effectively.
Sources: Landlord Today
TLA - The Landlord Association