Landlords seek to offload properties onto tenants, brokers say

Brokers report that they have seen an increasing number of tenants say they have received a first refusal to buy the property they are renting in the past two months.

This is believed to be due to a combination of the new Energy Performance Certificate (EPC) rules coming in 2025, an economic environment that makes it more difficult to produce yield and property prices at record highs. .

Shaw Financial Services founder Lewis Shaw says he has indeed seen this play out, “Often with an element of gifted equity.

“Following this, I have spoken to several brokers heavily involved in the buy-to-let (BTL) space and they are seeing many of their landlord clients looking to offload the parts of their portfolios that are either low yielding or have an EPC of less than C. We are arguably seeing the beginning of the big landlord sell off as BTL becomes a less attractive investment due to tax changes from interest relief, stamp duty property tax and new EPC rules which should be applied in 2025.”

Shaw continues, “For BTL landlords, selling to their tenants makes perfect sense: they can ask agents what the market value of the property is, then sell direct to tenants to avoid costly agent fees, not to mention the hassle of ‘get involved in chains. Additionally, any price reduction that tenants can use for their deposit essentially reduces the capital gains tax payable by the landlord upon sale.

Meanwhile Imran Hussain, Director of Financial Services at Harmony comments: “Diner owners are now looking at the upcoming EPC requirements and deciding to sell arguably at the top of the market.

“It gives some tenants the opportunity to buy, but I have also spoken to a number of tenants for whom, due to their credit history, buying a property will not be an option for a few years. . Let’s also not forget that less supply in the rental market will only drive up rents unless more social and social housing is built, which will push many tenants to breaking point.

And Peak Mortgages and Protection managing director Rhys Schofield says the BTL market is “cracking”. He adds: “Rate hikes have squeezed margins, the impending change to the EPC Ratings Act gives a clear deadline to either bring the 75% of non-compliant properties up to standard or sell them.

“The net result is that some owners want out. Organized homeowners now have ways to proactively tackle the problem, as Enable has launched a great home energy review product where it will offer a list of the works needed to bring a property up to standard.

“And while owners sit on equity after two years of exceptional price growth, they can raise capital to do the work and perhaps even grow their portfolio further. In some cases, of course, owners have their own cost of living concerns and cashing in to weather the coming economic storm is proving very appealing.

However, not everyone experiences this. For example, Staton Mortgages Director Mike Staton said, “I think the BTL market is still alive and well. I have accumulated a large portfolio of BTL clients over my career and only one of them has sold their properties in the past three years.

“For me, rental values ​​are increasing significantly and although interest rates are increasing, these costs will inevitably be passed on to the tenant via the rent. This will make it more difficult for tenants to move up the property ladder as the disposable income will not be there to save for a deposit.

“For me, the owner market is still successful and will remain so. However, with the coming into force of new legislation, such as licensing and EPC guidelines, I think we will see the death of the “cowboy”, who has no intention of caring about the well-being of his tenants and just wants to make a quick buck. . It won’t be a bad thing.

Yesterday, September 6, Goodlord released the results of a survey it recently carried out showing that 67% of letting agents believe an increasing number of landlords will leave this year.