Surge in Professional Landlords acquiring properties amidst market downturn

Surge in Professional Landlords acquiring properties amidst market downturn

In the midst of the United Kingdom’s property market facing its most severe decline in 14 years, recent findings have uncovered a surge in professional landlords acquiring properties.

This trend has emerged concurrently with a significant exodus of amateur landlords who find themselves grappling with soaring mortgage interest rates, compelling many to offload their holdings in substantial numbers.

A comprehensive study conducted by Cornerstone Tax, the UK’s preeminent property tax experts, has unveiled a stark reality: a mere one in five landlords have reported profitability in their investments in 2023. This revelation coincides with data from UK Finance, which indicates a worrisome trend. In the second quarter of the year, nearly 9,000 buy-to-let mortgages were in arrears by at least 2.5% of the outstanding balance, marking a steep 28% increase from the preceding quarter. Due to the escalating financial burden, the National Association of Property Buyers has issued a forecast predicting that approximately 100,000 landlords will exit the market annually between now and 2028.

The mass exodus of landlords has triggered a surge in the supply of buy-to-let properties entering the market. Savills, a prominent real estate firm, has disclosed that 25,000 homes in the UK changed hands from landlords to new owners between April and May, a notable increase compared to the 22,000 transactions observed in the preceding two months. This trend unfolds in the backdrop of a concerning decline in the average UK property value, currently standing at £279,569 – a staggering £14,000 less than its valuation just a year ago.

Additional research underscores the unpreparedness of many landlords who ventured into property ownership without sufficient knowledge, consequently incurring substantial losses. In response to the market dynamics, professional landlords have seized the opportunity to acquire buy-to-let properties at reduced prices, recognizing the potential for expanding their portfolios and positioning themselves for more favourable long-term returns in the property market, as noted by David Hannah, Group Chairman at Cornerstone Tax.

David discusses the current landscape of the rental market: “It comes as no surprise that landlords are struggling with increasing costs and subsequently falling into arrears as a result. Our data has found that 1 in 5 say they became landlords without sufficient knowledge and lost thousands as a result.

“However, the fact that professional landlords are now buying up former buy-to-let properties and putting them back on the rental market will mean that there is a resurgence in the wider availability of rental properties in a time when demand is outstripping supply. However, professional landlords buying additional stock has the chance to drive rental prices higher in the UK. Something which will be a concern to renters as figures earlier this week showed that rent prices are set to rise by 25% by the end of 2026.

“I think new measures should be considered and introduced into the rental market for aspiring landlords as it is becoming an increasingly unattractive environment for them. By making the buy-to-let market a more attractive investment, it will aid with the chronic undersupply of rental properties and has the ability to balance rental prices.”