UK Landlords Weigh Exiting Market as Rental Crisis Deepens

A recent study reveals a growing trend among UK landlords contemplating selling their properties due to escalating costs, marking a significant shift in the rental market landscape. Data from Cornerstone Tax, a leading property tax consultancy, indicates that nearly one in five landlords nationwide are considering exiting the market, with the figure soaring to 52% in Brighton. This trend is less pronounced in northern cities like Leeds and Manchester, where the percentages are 26% and 22% respectively.

The national average for landlords contemplating a market exit stands at 17%, underscoring a stark north-south divide. This trend coincides with a drop in living standards for renters, as evidenced by research from Dataloft. The data shows a notable decrease in families renting larger homes. In 2020, 57% of families with annual incomes between £30,000 to £70,000 rented homes with at least three bedrooms, but by 2023, this proportion had declined to just under 51%.

David Hannah, Group Chairman of Cornerstone Tax, attributes this shift to a severe supply crisis in the rental market, exacerbated by record mortgage rates and the heaviest tax burden since World War II. These factors are pushing many buy-to-let landlords out of the market, further straining the availability of rental properties. “Spiralling interest rates and the highest tax burden since the second world war have forced thousands of landlords to sell up, which then puts further pressure on renters due to a lack of stock,” Hannah explains.

He further observes a migration trend among landlords, with many moving away from the capital and South East to the North East of England, where property prices have seen significant growth. Hannah argues that the government’s recent Autumn Statement missed an opportunity to alleviate the situation by not removing the second home surcharge for private rental sector investors and failing to reinstate full relief for mortgage interest payments.

Hannah suggests that these measures could have reduced purchase costs for landlords, potentially allowing them to stabilize or lower rents. “This double measure would have both reduced the costs of purchase, whilst allowing landlords to freeze, or even potentially cut, rents,” he states, noting that it could also stimulate purchases in the market at a time when affordability issues hinder owner occupiers from buying.