Will more landlords leave the private rental sector this year due to increased costs, higher taxation and difficulty in raising mortgages? DBPR asked Tim Hassell, Managing Director at London lettings specialists Draker…
“There will be a contraction of landlords. We believe that up to 10% of the market will sell their buy to let properties within the next 24 months. These will mainly be made up of the more highly leveraged landlords who rely on the rental income to pay large buy-to let mortgages.
However, I do feel that the sentiment with many of our more cash rich clients will be to try to buy these same properties, potentially at a lower rate. If the current sales market continues to drag and there is a mini-flood of landlords looking to exit the lettings market, there could be a short term crash in prices that many of our more aggressive cash-rich investors will take advantage of.
Most seasoned landlords in central London buy to hold long term for capital growth – rather than to make money from short term rental gains.
As long as they can structure their portfolios to work from a cash flow point of view – the long term rise in value is what most will now be looking at.
Traditionally, London landlords have been very shrewd in waiting out events and buying when things look “very bad” to short term investors. They then snap up a bargain and wait a few years for the next price rise. I also think that there will be a small but significant move toward institutional residential investments – companies buying multiple properties and much larger landlords. This would start to bring London in line with the rest of Europe – just as we are leaving….the irony.
A lowering of rental property levels in Central London will also be a very good thing for those landlords who are left behind as rental prices will inevitably start to rise and yields will correspondingly increase.”
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