The majority (73%) of landlord sales in 2022 were made by those reaching retirement, with many being early adopters of the first buy-to-let mortgages which launched in 1996, Hamptons research shows.
A further 96,000 landlords will turn 65 each coming year, which will likely mean that demographics will drive landlord sales to a new peak within the next five years.
As it stands the typical landlord is 60 years old, while almost one million (924,000) are already over the age of 65.
Aneisha Beveridge, head of research at Hamptons, said: “Two decades on from the birth of buy-to-let mortgages in the late 1990s, early investors are starting to sell up.
“This means that demographics alone will push up the number of landlord sales over the next five years to reach a new peak.
“This was likely to happen irrespective of the tax or regulatory changes introduced since 2016 and the more recent higher interest rate environment.
“But while the tax and regulatory changes haven’t driven a buy-to-let sell off, they have stemmed the next generation of landlords.
“The number of new purchases by landlords has remained relatively muted. Millennials, who have struggled to get onto the housing ladder, have not been in a position to afford or consider purchasing a buy-to-let too.
“While house price growth continues to slow, rents keep moving in the opposite direction. Tenants find themselves with a little more choice than they did last year, which has been reflected in a 10% increase in the number of tenants moving home.
“However, the number of rental homes on the market seems to have found a new normal at nearly two-thirds below pre-pandemic levels.”
The purchases made by these landlords 15-25 years ago following the introduction of the buy-to-let mortgage still make up the majority of privately rented homes in Great Britain.
Just over half (51%) of today’s total number of outstanding buy-to-let mortgages were taken out between 1996 and 2007.
And it’s this cohort of ageing investors who bought when the sector was growing rapidly that are now increasingly likely to sell up and cash out.
They leave behind a gap which is not being filled by new landlords entering the sector.
Many of the first buy-to-let mortgages were used to purchase new low-rise city centre flats and it’s these flats which form the largest proportion of sales by today’s long-term landlords.
Suburban London tops the list with 60% of landlord sales in Redbridge having been owned for 15+ years, followed by 59% in Ealing, 58% in Harrow, 55% in Barnet and 53% in Enfield.
While age tends to be the primary trigger for selling up, in many cases the decision to sell has been compounded by lower-than-average returns, which in turn have been exacerbated by higher interest rates. An investor who bought 20 years ago was achieving a gross yield of 4.3% relative to their sale price, compared to a landlord buying today who is achieving 6.1% (chart 3). This implies that in many cases, these landlords are selling homes where long-term tenants were paying rents which have slipped below market rates.
