The UK rental market has seen a lot of changes in recent years, with rising demand, higher rents, and increased regulation all impacting landlords' bottom lines.
With the average yields for buy-to-let properties dropping, mortgage rates remaining high, and the Renters Reform Bill looming, many landlords may be tempted to exit the rental market by selling up in 2023. However, there are compelling reasons why landlords should think twice before deciding to sell.
The first reason not to sell your rental property in 2023 is that the rental market in the UK remains extremely competitive.
Demand for rental accommodation continues to grow as more people find themselves priced out of homeownership. This increased demand, coupled with a shortage of rental properties, has led to higher occupancy rates and faster letting times for landlords.
Not only does this mean that rent prices are rising (we’ll cover this later), but it also means less risk of fallow periods where no tenants can be found and landlords can be choosier when accepting tenants for their property.
This puts landlords in a strong position where they can pick responsible, secure tenants who they believe are likely to look after the property and want to stay long-term.
The UK housing market saw astronomical price rises throughout the pandemic. However, prices have been falling in 2023 as the cost-of-living crisis bites and higher mortgage rates reduce buyer affordability.
In our local area of Bristol, it was forecast earlier this year that house prices would fall by 20%.
This means that, if you’re planning to sell properties, you’re less likely get less profit from a sale than in previous years. Holding onto your rental property means you have the chance to ride out the upcoming price instability and sell for a higher return later.
Landlords also need to consider rising rents in 2023. As the supply-demand imbalance in the rental market continues, rents are projected to increase.
Landlords who retain their rental properties can benefit from this rental growth and higher yields. If you sell up, you may miss out on the opportunity to charge higher rents and boost your rental income.
With projections showing long-term growth in rents, holding onto your buy-to-let could provide stable returns for years to come.
Some landlords may be tempted to sell if they are tired of the responsibilities and hassle of being a hands-on landlord. This may particularly be the case considering changes around the expectation of energy performance certificate (EPC) grades for rental accommodation and no-fault evictions being due to disappear.
However, taking on a property manager can give you an opportunity to generate a healthy passive income from your rental property with much less case and attention from you.
Full property management services take care of everything from finding tenants, collecting rent, and 24/7 maintenance. This removes the stress while still providing a regular income. An accomplished property manager may even be able to offset the additional expense by using their expertise to find a more secure or lucrative rental deal.
With more hands-off options, landlords can retain their buy-to-let investment while removing the day-to-day workload and financial risks.
One of the best reasons not to sell your rental property this year is to take advantage of guaranteed rent schemes, which provide guaranteed monthly income even when the property is vacant.
With Let’s Rent, for example, landlords receive guaranteed rent each month, regardless of its status. We can also take on properties in a poor state of repair and bring them up to letting standards as part of our service.
These long term agreements provide peace of mind against the risks of void periods and tenant rent arrears. As the landlord, you still own the property while benefiting from the security of a guaranteed income. This is a particularly good option for those who want a property off their hands in a practical sense but don’t wish to sell during the property price slump.
These schemes allow you to retain the long-term benefits of buy-to-let, such as capital growth, without the common risks that encourage selling. Guaranteed rent is taxed as normal rental income, so higher rate taxpayers do not miss out on the tax advantages.
While many matters may tempt landlords to sell up in 2023, there are compelling financial reasons to retain rental properties for long-term gains.
The strong demand, rising rents, and possibilities of various services the buy-to-let market indicate that landlords can maximise returns by holding onto their investments this year.
Property experts like the agents at Let’s Rent provide security against the risks of vacant periods and rent arrears. Given predictions of falling house prices and interest rate hikes reducing buyer demand, landlords should think carefully before selling a rental property next year.