House price peril as three quarters of landlords may be forced to sell

Three quarters of the UK’s landlords could be forced to sell their rental property due to continued financial pressure and new legislation being introduced by the government, a new study has found.

Looming hikes in the Bank of England base rate, rising stamp duty for property owners, the tenant fees ban and loss of tax relief on buy-to-let properties all add up to spell disaster for the UK’s housing market.

This could be especially damaging as 60 per cent of the UK’s landlords only have one property, letting it out as a secondary, rather than primary income. This could explain the fact that 75 per cent of landlords say they would have to sell if they were making a loss, breaking even or not making enough profit.

With the upcoming legislative changes in the buy-to-let market, 41 per cent of landlords indicate they will be forced to increase rents. These rent rises will affect 1.8 million tenants in the UK and could equal a whopping £120.6 million, according to online letting agent MakeUrMove.

The average monthly rent in the UK already stands at £1,198, and experts are now predicting a further rent rise of 5.6 per cent, piling additional pressure on tenants across the UK.

In addition to the implications on rents, the recent study by MakeUrMove revealed 10 per cent of landlords also said that they would definitely have to sell their property due to legislative changes, potentially leaving 450,000 tenants homeless. This could also cause house prices to fall dramatically if the market is flooded.

MakeUrMove managing director, Alexandra Morris, commented:

“The result of the rising costs associated with the changing legislative and regulatory environment will either be increased rents or landlords having to sell their properties. The worst-case scenario will be a housing market crash if landlords default on their mortgage payments or decide to cut their losses. The government are currently sleep walking into this crisis. The alarm bells should be ringing, and this should be a major concern for both homeowners and the government. The government needs to act now to ensure it remains financially viable for landlords to meet their financial obligations.”

Despite the cost implications, 46 per cent of landlords aim to keep rents the same, taking a hit to their bottom line, rather than passing rising costs on to tenants, recognising that many tenants can ill-afford rent increases.

Morris added:

“Despite there being plenty of good landlords out there who want to keep the impact to their tenants minimal, the reality of the situation is that once the upcoming legislative changes come into effect, many landlords will find this unaffordable and may be forced to increase rents regardless.

“While we wholly believe the industry needs to be regulated, the taxation changes could have a huge impact on smaller landlords and those ‘accidental’ landlords who have a rental property they may have either inherited or couldn’t sell. They might struggle in the new environment, having potentially devastating effects on the housing market. This is particularly concerning when private landlords provide a vital role as the backbone of the UK housing market.

“The government is supposedly bringing in this legislation to protect tenants, but the unintended consequence will likely be landlords having to increase rents, especially if they are forced into debt on their rental property. And this is the best-case scenario. In reality it could be much worse.”