The English Housing Survey and other research suggests there may be turbulent times ahead

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The English Housing Survey and various pieces of industry research suggest that there may be rough times ahead for the buy-to-let market.

Every two years, the Government publishes the English Housing Survey, that offers landlords and other property professionals detailed information about the property market. Here are the most pertinent findings in relation to buy-to-let landlords:

  • most landlords operate as individuals with 94 per cent. of landlords renting personally, 4 per cent. through a company and 2 per cent. operating as some other organisation
  • although 45 per cent. of landlords own one property, half of buy to let homes are let by the 17 per cent of landlords with five or more properties
  • the number of single property landlords has plunged from 78 per cent. of all private rented homes to 45 per cent. since 2010 – equivalent to a decline from 40 per cent. to 21 per cent. of the market
  • the number of landlords with portfolios of five or more homes climbed from 5 per cent. to 17 per cent. since 2010 – from 39 per cent. to 48 per cent. market share.

It is clear from the above snippets that the vast majority of private landlords are individuals who rent out one or two properties. They are not ‘professional’ landlords with large portfolios of properties but rather smaller, possibly accidental landlords. It is these smaller landlords who are at particular risk from the increase in the existing tax burden and proposals to bring in yet more financial penalties.

In addition, new research from the National Landlords Association (NLA) shows that 79 per cent. of landlords are only servicing the interest on their mortgages. As they contend with the rising costs of the business, it seems they are not able to pay down significantly on their loans.

Richard Lambert, CEO of the NLA, says: “There are myriad costs to running a letting business, including maintenance, repairs and upgrades, licensing, and insurance. Rents have to cover all these costs, as well as the interest on a mortgage, where there is one. Housing is expensive for everyone at present. The Government needs to encourage the supply of housing in all tenures, including the private rented sector.”

Further research contends that average rental yields in the UK have dropped to a three-year low of 5.6 per cent. It claims that almost a quarter of buy-to-let investors, especially those with larger portfolios, now plan to sell up and leave the private rented sector, with the research citing tax and regulation changes as the main reasons why landlords are offloading properties.