An Exodus of BTL Landlords Predicted in 2023

Rising arrears and falling prices are forcing landlords to reconsider their letting decisions. Many are considering leaving the market in 2023 as house prices continue to fall across the country. According to Goodlords webinar titled 2023 predictions, more than 50 percent of the letting agents are of the opinion that landlord volumes will decrease this year primarily because of the new regulations and rising interest rates.

Industry experts believe that the pace of regulatory change, combined with the new economic situation, will put more pressure on the landlords and force them out of the market. The new policies have yet to have any positive developments for the landlord. It is also restricting supply. The unfavorable conditions leave landlords with no option but to look elsewhere to deploy their capital. Despite the demand for rental properties remaining high, landlords are concerned that mortgage costs will rise significantly and the property's market value may fall. Their concerns are not entirely misplaced.

It is clear that the foundation for the buy-to-let landlords' era was put in place somewhere in late 2022, as cheap money was no longer available to buy or expand property portfolios. It is becoming increasingly challenging for people to buy property by borrowing a large chunk of its value. Many landlords are having a serious relook at their portfolios to decide what property to retain and what to twist. Stringent regulations, rising costs, and harsh taxation will force many off the market in 2023.

Landlords with mortgages expiring in the next 12 months will find themselves between a rock and a hard place unless the property has been on repayment for the past five years. Once landlords realize the severity of the situation and the financial implications awaiting their next mortgage renewal, there will be a mass exodus.

In 2023, most landlords will have to deal with three major challenges.

In 2023, most landlords will have to deal with three major challenges.

They will, of course, struggle to remortgage. Remortgaging for a better rate simply won't be possible for many landlords, as the rental yield calculation is no longer feasible given the higher interest rates. The tax advantage of renting is nonexistent now. BTL mortgages are not tax-deductible. It may cause significant losses to many landlords in the coming years. Landlords with deep pockets may have an advantage. Rental yields are increasing as rents rise and prices come down. Distress sales may yield good properties.

Hundreds of agents have signed an open letter to Michael Gove, Secretary of State for Levelling Up, Housing, and Communities, asking for increased support for the rental sector to negate the rising pressures. They believe the cost-of-living crisis and inflation can adversely impact arrears volumes. They also expect rent arrears to surge by up to five percent in 2023. While many in the industry think rent freezes will help leaseholders deal with the current situation, others are still determining if a rent freeze is a solution. They opine it will reduce the number of available properties and further aggravate the supply and demand issues.