'Huge number of landlords retiring': what it means for the housing market

Will landlords selling up mean life is easier for those hunting for a new home?

Significant numbers of older landlords are choosing to sell up and retire, potentially boosting property supply to those looking to get onto or move up the housing ladder.

That’s according to new analysis from Hamptons, which found that around 140,000 landlords retired last year.

It pointed to the large number of rental properties owned by older people ‒ there are around 96,000 landlords turning 65 each year, while in total there are around one million landlords who are already 65 or over.

The firm argued that this “cohort of ageing investors” are walking away, and not being replaced by younger landlords, potentially opening up greater levels of choice to those looking to purchase a home of their own.

Why landlords are selling up

There’s no shortage of reasons why landlords, particularly older ones, may be considering exiting the market.

It’s not exactly a secret that things have got tougher for landlords over the last six or seven years, as a result of a host of tax and regulatory changes.

As we have explained on loveMONEY, this has been a factor in the increase in landlords opting to purchase through limited companies, since this can mitigate the damage.

Landlords have also found it tougher to make the sums add up as mortgage rates have increased.

With mortgage lenders expecting landlords to cover as much as 150% of the interest charged on the mortgage through rent, that has put landlords in the position of having little option but to hike rents.

On top of that, there are also new regulations coming in around energy efficiency, requiring rental properties to have at least a C rating on their energy performance certificate. 

Improving the efficiency of rental properties is going to cost a significant portion of cash ‒ previous research from Knight Frank has found that the average amount needed to boost a property with a D rating or below to a C stands at around £9,260.

A double-edged sword

On the face of it, you can view this trend as a positive.

One of the biggest issues holding back would-be first-time buyers from purchasing a property has been the frankly crazy rate at which house prices have risen in recent years.

Back at the start of the pandemic, the average house was worth £230,609, yet by November last year it was just shy of £295,000 according to figures from the Office for National Statistics (ONS), an incredible growth in just a couple of years.

And that rate makes it harder for potential buyers to save a sufficient deposit, let alone pass affordability tests for mortgages.

However, the chaos following the mini Budget last year and the swell of landlords exiting the market has slowed things down.

The bump in supply of property available to buy has pushed house prices down ‒ albeit only slightly ‒ making it easier (relatively) for would-be buyers.

What’s more, if potential buyers are facing less competition from investors for available properties, then that would seem to boost their chances of accessing the housing market in an affordable way.

Not as positive as it may seem

In practice, it may be that things don’t work out quite so positively, however.

For starters, many hopeful buyers are currently renting, and trying to save up their spare cash to use as a deposit. 

If landlords are exiting the market, then that means a much smaller level of supply of rental properties.

And that heightened level of competition will drive up rents even further, making it all the more difficult for buyers to save a big enough deposit.

After all, it makes little difference that house prices are falling if you have no deposit to speak of.

The general economic situation is also one that should cause a little concern when it comes to the prospects of first-time buyers.

Mortgage rates have been pushed higher following the fallout from the mini Budget debacle last year, meaning higher repayments for borrowers. 

As a result, even if those hopeful homeowners have saved a decent deposit, they may now face a tougher time passing lender affordability tests, meaning they can’t borrow a sufficient amount to cover a purchase.

Given the persistent rate of inflation, there will be plenty of people who feel more wary about taking on the commitment of a mortgage right now too.

It’s certainly true that there is a bit of a shift going on in the property market right now, but only time will tell whether first-time buyers are really able to benefit from some landlords heading for the exit.