{"id":6094498,"date":"2023-06-22T08:50:48","date_gmt":"2023-06-22T07:50:48","guid":{"rendered":"https:\/\/www.buyassociationgroup.com\/en-gb\/?p=6094498"},"modified":"2023-06-22T08:50:48","modified_gmt":"2023-06-22T07:50:48","slug":"london-landlords-sell","status":"publish","type":"post","link":"https:\/\/www.buyassociationgroup.com\/en-au\/2023\/06\/22\/london-landlords-sell\/","title":{"rendered":"More London landlords selling up as rate rises eat into yields"},"content":{"rendered":"

A growing number of London landlords are struggling to make a profit on their rentals as interest rates continue to put pressure on the margins of mortgaged investors.<\/strong><\/p>\n

Talk of a general landlord exodus is “overdone”, says the latest report from Zoopla focusing on the country’s rental market, with a stable flow of investment still being seen in the private rented sector.<\/p>\n

As interest rates rise, though, it is apparent that those with the lowest levels of leverage – including both landlords and homeowners – are experiencing the smallest effects, while those with large mortgages are the most likely to be reassessing their options right now.<\/p>\n

Zoopla’s quarterly UK Rental Market Report<\/a> found that London landlords, and those in the south east, are leading the way when it comes to selling their rental homes<\/a>. More than half (51%) of all landlord sales in the quarter were located in this part of the country.<\/p>\n

Why are London landlords leaving?<\/h4>\n

A major deterrent for London landlords now is linked to rising mortgage rates<\/a>, which has the potential to significantly increase monthly outgoings and therefore deplete the amount of profit that can be made. This is particularly the case since mortgage interest relief<\/a> changes fully came into effect.<\/p>\n

With London and the south east being home to the country’s most expensive property markets by some margin, investors there on the whole tend to have higher levels of borrowing. As a result, when rates rise, they will be more impacted than those with cheaper properties and smaller loans.<\/p>\n

The report points out that just under an estimated two-fifths of landlord have no mortgage, and cash buyers<\/a> are certainly in a much better position at the moment to invest in the market.<\/p>\n

However, while higher mortgage rates are “unwelcome but manageable” for landlords with the lowest loan-to-values (LTVs), it is those with larger levels of borrowing, representing about 20-30% of the total – and including many London landlords – that will be hardest hit.<\/p>\n

London landlords and those in the south east are more likely to have “high capital values and low rental yields”.<\/p>\n

“This makes the economic situation tougher for landlords in the face of rising mortgage rates, as profits are reduced, especially for higher rate tax payers.<\/p>\n

“The main option for landlords is to inject for equity at a point of refinancing. However, it’s an unattractive option for many with concerns over low yields and the risk of further price falls.”<\/p>\n

Rising rents across the country<\/h4>\n

London landlords and tenants have seen rents rise by 13.5% on average over the course of the last year, and across the country as a whole rents have increased<\/a> at a faster rate than wage growth for the past 21 months.<\/p>\n

For new lets in the UK, annual rental inflation now stands at +10.4%, and Zoopla points out this is the 15th consecutive month that rent rises have been in double-digit figures. This has largely been a result of demand continuing to be greater than supply in many areas, pushing up prices.<\/p>\n

The report notes: “With little prospect of increased supply, the growing unaffordability of renting will start to act as a drag on rental inflation. We expect rental growth to slow towards 8% by the year end, still above earnings growth.<\/p>\n

“The impact of higher rents is not uniform with those on low incomes bearing the brunt, with increasing signs of\u00a0 stress.”<\/p>\n

Over the past six months, more than half of tenants say their rental costs have risen. The current outlook from Zoopla is that rental price rises will shrink back slightly to 8% by the end of 2023, mainly due to affordability pressures in the highest value areas – so this could be something London landlords experience the most.<\/p>\n","protected":false},"excerpt":{"rendered":"

A growing number of London landlords are struggling to make a profit on their rentals as interest rates continue to put pressure on the margins of mortgaged investors. Talk of a general landlord exodus is “overdone”, says the latest report from Zoopla focusing on the country’s rental market, with a stable flow of investment still… Read more »<\/a><\/p>\n","protected":false},"author":1069,"featured_media":6039615,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[2,12,26],"tags":[15,11,5],"acf":[],"_links":{"self":[{"href":"https:\/\/www.buyassociationgroup.com\/en-au\/wp-json\/wp\/v2\/posts\/6094498"}],"collection":[{"href":"https:\/\/www.buyassociationgroup.com\/en-au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.buyassociationgroup.com\/en-au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.buyassociationgroup.com\/en-au\/wp-json\/wp\/v2\/users\/1069"}],"replies":[{"embeddable":true,"href":"https:\/\/www.buyassociationgroup.com\/en-au\/wp-json\/wp\/v2\/comments?post=6094498"}],"version-history":[{"count":0,"href":"https:\/\/www.buyassociationgroup.com\/en-au\/wp-json\/wp\/v2\/posts\/6094498\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.buyassociationgroup.com\/en-au\/wp-json\/wp\/v2\/media\/6039615"}],"wp:attachment":[{"href":"https:\/\/www.buyassociationgroup.com\/en-au\/wp-json\/wp\/v2\/media?parent=6094498"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.buyassociationgroup.com\/en-au\/wp-json\/wp\/v2\/categories?post=6094498"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.buyassociationgroup.com\/en-au\/wp-json\/wp\/v2\/tags?post=6094498"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}