The UK's buy-to-let (BTL) property market is experiencing a notable shift, with an increasing number of properties changing hands directly between landlords. This internal market activity comes as some investors choose to exit the sector, influenced by factors such as rising mortgage rates and the recent passage of the Renters' Reform Act. Conversely, other landlords are seizing these opportunities to expand their portfolios, suggesting a recalibration rather than a widespread exodus from the rental market.
The landscape for landlords has become more challenging over the past year. Mortgage rates, though showing some signs of stabilising, remain significantly higher than the ultra-low levels seen in previous years. For instance, the average two-year fixed mortgage rate across all deposit sizes stood at approximately 5.91% in early May 2024, according to Moneyfacts, a substantial increase from rates below 2% just a few years ago. This rise directly impacts landlords' profitability, especially those with smaller margins or those needing to remortgage. The Renters' Reform Act, now law, introduces significant changes, including the abolition of 'no-fault' Section 21 evictions, which some landlords view as an increased regulatory burden.
Despite these pressures, data suggests a dynamic internal market. Properties are being sold by landlords looking to divest, but often purchased by other experienced investors rather than first-time buyers or owner-occupiers. This phenomenon could limit the supply of homes available for those aspiring to get onto the property ladder, particularly in areas with a high concentration of rental properties. While specific figures on landlord-to-landlord transactions are not routinely published by major property portals like Rightmove or Zoopla, anecdotal evidence from property agents and conveyancers indicates a discernible trend of investor-to-investor sales.
For existing homeowners, this trend has a nuanced impact. While a reduction in the overall number of rental properties could theoretically ease competition for certain types of homes, the continued churn within the investor market means that a significant portion of the housing stock remains within the rental sector. This dynamic might contribute to sustaining rental prices, which have seen robust growth across the UK. For example, Rightmove reported that average asking rents outside London were up 8.4% annually in Q1 2024, reaching a new record of £1,291 per calendar month.
The implications for first-time buyers are particularly pertinent. If properties being sold by one landlord are primarily acquired by another, it means fewer homes are entering the open market for owner-occupation. This perpetuates competition and could keep entry-level property prices elevated. Government initiatives like Help to Buy have concluded, and while stamp duty relief for first-time buyers exists for properties up to £425,000, the challenge often remains the initial deposit and affordability in a high-interest rate environment. The continued presence of active investors in the market, even as some depart, underscores the ongoing complexities in achieving widespread homeownership.