The pace at which landlords are selling homes has slowed, but the Renters’ Rights Act could prevent up to 100,000 unsold homes from returning to the rental market, new research shows.
The proportion of homes for sale that were previously rented fell to 9.2% in June, down from 11.3% last year and below the 2021-2022 peak, according to analysis by Hamptons using data from parent group Connells.
June marked a major turning point, as it marked the first time since 2019 that landlord purchases exceeded landlord sales.
However, Hamptons estimates that the Renters’ Rights Act could prevent up to 100,000 homes from returning to the private rental sector if landlords fail to sell them.
Landlords who submit a Ground 1A notice to sell under the law, which came into force in May, face a mandatory 12-month ban on re-letting their property even if a sale falls through.
Based on last year’s market, Hamptons predicts that between 80,000 and 100,000 unsold rental properties would not be able to return to the rental market under the new rules.
Hamptons says the slowdown in landlord sales is partly a reflection of the fact that many have already left the sector following tax changes, higher mortgage rates and other reforms in recent years.
The agency also believes that weaker sales conditions are making landlords more cautious about selling, especially in southern England, where higher prices, lower yields and slower transaction times increase the risk of properties remaining vacant.
The problem mainly affects apartments, which accounted for 51% of the rental properties for sale last year.
In Britain, 24.4% of apartments for sale in June had previously been rented, compared to 7.8% of houses.
Meanwhile, Hamptons found that rental growth continues to increase.
Average rents for newly rented properties rose 1.6% year-on-year to £1,392 per month in June, the fastest annual growth in thirteen months.
In the broader rental market, including existing leases, rents increased by 2.2% annually.
Existing tenants who saw their rent increase experienced an average increase of 5.4%.
Aneisha Beveridge, head of research at Hamptons, said: “The Renters’ Rights Act has been a long time coming, and most landlords who wanted to leave the sector as a result have probably already done so.
“While the new rules may have encouraged some landlords to sell, the bigger shift is the result of years of tax changes and higher mortgage costs, which have gradually reduced the number of landlords in the market.
“What has changed recently is the balance between risks.
“Due to a more difficult sales market and the introduction of a twelve-month reletting ban, selling has become a more complicated proposition for landlords.
“For many, the prospect of being left with a vacant property that cannot easily return to the rental market has made holding on to an investment more attractive.
“For those landlords who have chosen to hold back, there are signs that their decision is paying off.
“Yields have improved in recent years as rental prices have risen faster than house prices, giving investors more leeway to absorb higher financing costs.
“At the same time, rental growth is picking up again, with rents on newly rented homes rising at the fastest pace in over a year.
“While challenges undoubtedly remain, conditions for landlords are arguably better than they were 12 months ago.”