Landlords Reconsider Letting Amid Rising Costs

Rising arrears and falling house prices are prompting many landlords to rethink their letting decisions. According to a Goodlords webinar titled 2023 Predictions, over 50% of letting agents believe landlord numbers will decline due to new regulations and rising interest rates.

Regulatory and Economic Pressures Driving Landlords Out

Industry experts argue that the fast-paced regulatory changes combined with economic instability will further pressure landlords. The absence of favorable policies and increasing costs are restricting rental supply, making it harder for landlords to stay in the market.Despite high rental demand, landlords worry about rising mortgage costs and falling property values, leading many to consider alternative investment opportunities.

End of the Cheap-Money Era for Buy-to-Let

The foundation of the buy-to-let (BTL) exodus was set in late 2022, when cheap borrowing options disappeared. It has become increasingly difficult to expand property portfolios, forcing landlords to reassess their investments. The combination of strict regulations, rising costs, and punitive taxation is expected to push many landlords out of the market in 2023.

Mortgage Renewals Could Trigger a Mass Exit

Landlords facing mortgage renewals in the next 12 months could be in serious financial trouble—especially if they haven’t been on repayment plans for the past five years. As mortgage costs soar, many landlords will realize the financial strain of their next renewal, potentially leading to a mass exodus from the sector.

Three Major Challenges for Landlords in 2023

1. Remortgaging Struggles

• Securing a better mortgage rate will be nearly impossible due to higher interest rates.
• Rental yield calculations no longer align with financing costs.

2. Lack of Tax Advantages

• BTL mortgage interest is no longer tax-deductible, making renting less profitable.
• Many landlords will face significant financial losses in the coming years.

3. Distress Sales and Investment Shifts

• Landlords with deep pockets may find opportunities in distressed sales.
• Rising rents and falling property prices could create new investment dynamics.

Calls for Government Support and Rent Control Debate

Hundreds of agents have signed an open letter to Michael Gove, urging greater support for the rental sector. They warn that inflation and the cost-of-living crisis could lead to a surge in arrears of up to 5% in 2023. While some believe rent freezes could help tenants, others argue it would reduce property availability, worsening the supply-and-demand imbalance.