The buy-to-let market in the South East has experienced a significant decline, as landlords jump ship thanks to high mortgage costs and tax changes.

According to Hamptons analysis of data from Countrywide, one of the UK’s largest property groups, landlords in the region sold 13,710 more homes than they bought last year – the largest net loss since they began recording data in 2010. The equivalent of one in six (16%) rental properties in the South East were sold.

Unsurprisingly, London also saw a big drop, losing 10,590 rental homes and the South West went down by 7,810.

Squeezed from both ends

Aneisha Beveridge of Hamptons suggests declining profitability as a key factor. The South East is the third lowest-yielding region for rental properties in England and Wales and “it’s areas like this where highly leveraged landlords will likely come under the most pressure from higher mortgage rates.”

Although rental yields in the South East average 5.6% (compared to the national average of 6.2%), buy-to-let investors spend 18% more than average when buying property.

It’s perhaps worth noting that following recent interest rate rises, you can now secure 3.9% gross, paid monthly, from National Savings. Clearly, 3.9% isn’t as much as 5.6%, but it is ‘hassle free’ income compared to owning a property.

“The environment for landlords is just so challenging right now.” Chris Norris, National Residential Landlords Association

Opportunity in uncertainty

Landlords across the UK are already facing increased business costs after tax relief on mortgage repayments was scrapped in 2020 for those who own buy-to-lets in their own names rather than via a limited company.

Many landlords are also concerned about plans to ban no-fault evictions this year, which they fear will make it harder to evict problem tenants, especially given court backlogs. There’s also a degree of confusion around the implications of government proposals requiring all newly-let properties to achieve an EPC rating of C or above by 2025.

One person’s challenge is another person’s triumph though (or something like that) and the decline in the buy-to-let market might present an opportunity for potential investors looking to purchase properties at lower prices thanks to the decrease in demand on housing stock. The demand for renters remains ever-present, with 20% of the UK living in rented accommodation and with it being harder than ever to get on the bottom rung of the property ladder I can’t see this changing any time soon.