Up to 100,000 ex-rental homes could be left vacant – Mortgage Finance Gazette

The share of homes listed for sale that were previously rented dropped to 9.2% in June, down from 11.3% last year and below the 2021-2022 peak, according to analysis by Hamptons of data from its parent group Connells.

June marked a significant turning point, as it was the first time since 2019 that landlord purchases exceeded landlord sales.

However, Hamptons estimates that the Renters’ Rights Act could prevent up to 100,000 homes from returning to the private rented sector if landlords fail to sell them.

Landlords who serve a Ground 1A notice to sell, under the Act, which came into force in May, face a mandatory 12-month ban on re-letting their property, even if a sale falls through.

Based on last year’s market, Hamptons forecasts that between 80,000 and 100,000 unsold rental properties would have been prevented from returning to the rental market under the new rules.

Hamptons says the slowdown in landlords selling up is partly a reflection of the fact that many had already left the sector following tax changes, higher mortgage rates and other reforms over recent years.

The agency also believes weaker sales conditions are making landlords more cautious about selling, particularly in southern England where higher prices, lower yields and slower transaction times increase the risk of properties remaining empty.

The issue is especially pronounced for flats, which accounted for 51% of rental homes marketed for sale last year.

Across Britain, 24.4% of flats listed for sale in June had previously been rented, compared with 7.8% of houses.

Meanwhile, Hamptons found that rental growth continues to strengthen.

Average rents agreed on newly-let homes rose 1.6% year-on-year in June to £1,392 per month, the fastest annual growth recorded for 13 months.

Across the wider rental market, including existing tenancies, rents increased by 2.2% annually.

Existing tenants who saw their rent increase experienced an average rise of 5.4%.

Hamptons head of research Aneisha Beveridge says: “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.

“What’s changed more recently is the balance of risk.

“A tougher sales market and the introduction of a 12-month re-letting ban mean selling has become a more complicated proposition for landlords.

“For many, the prospect of being left with an empty property that can’t easily return to the rental market has made holding on to an investment look more attractive.

“For those landlords who have chosen to sit tight, there are signs that their decision may start to pay off.

“Yields have improved over the last couple of years as rents have risen faster than house prices, giving investors more headroom to absorb higher borrowing costs.

“At the same time, rental growth is picking up again, with rents on newly let homes rising at their fastest pace in more than a year.

“While challenges undoubtedly remain, conditions for landlords arguably look better than they did 12 months ago.”