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Housing Crisis: Should Landlords Hold, Sell or Buy?





Hold, sell or buy? A question that many landlords are asking themselves in the current housing crisis we find ourselves in. With house prices facing the fastest fall in 14 years what does this mean for landlords?


Is Selling the Best Option?

According to Hamptons, since 2016, 300,000 more houses will have been sold by private landlords than have been purchased. The increased costs that landlords face as well as the uncertainty in housing policies for the upcoming general election are among a few reasons that landlords are being pushed out of the market. Whilst many are selling, is it really the best option for landlords?


Before selling, it is important to work out if houses are actually selling in this climate. HMRC data from July 2023 shows transactions were at a 10 year low. Residential property transactions in July 2023 were 16% lower than that of July 2022. Furthermore, the time it takes to sell a property has been slower than the average over the last 12 months. If you’re thinking about selling, it may be best to hold off for a few years in the hopes of value increases in the future.


Buying is Still Viable

Don’t let the current interest and mortgage rates put you off buying if you can afford it as now could be as good a time as any. With income growth remaining strong over recent months, this current climate has the most affordable price-to-income ratio since 2020. This has partially offset the impact of higher mortgage costs; we have seen a fall that began in July 2023 and is continuing into October 2023 which is good news if you are looking to buy. Considering a landlord often has no chain in the process, now could be the perfect time to find a bargain, particularly for a seller who wants a quick sale before rates peak.


Now would also be the time for a landlord looking to upgrade from a smaller property to a larger one. Comparing sales from April 2023 to April 2022, there was higher demand for properties in the lower priced 40% of the market whilst there was lowered demand for the properties in the higher priced 40% of the market. Essentially, this would be ideal for a landlord planning on replacing a lower occupancy house with a higher yield HMO. Increasing numbers of investors are spotting these opportunities to buy to rent in the current market particularly due to the short supply of quality rental homes.


Hold Onto That Property

Despite challenges that landlords are currently facing such as stamp duty increases, the (potential) introduction of the Renters’ Reform Bill and the reduction of mortgage interest tax relief, many are choosing to hold onto their properties for a few reasons including market stability, demand and yields.


Whilst it seems far off, it is important for landlords to remember that the market will stabilise again. Holding onto a property means there’s the likelihood of benefitting from increased yields in the future. It is important that landlords do not make impulse decisions as doing so could have the potential of causing missed opportunities and large losses.


Although housing prices are the lowest we have seen in years, the current mortgage rates we are facing make it very hard for first time buyers to make it onto the property ladder. In turn, the demand for rental properties remains rather high. Due to this, it is likely that there will be an abundance of high quality tenants who are willing to pay higher monthly rent.


Rental yields in UK are still high compared to other countries providing a strong, stable income stream for landlords. The current market conditions give good reason to increase rental prices. In turn, this allows landlords to maintain profits in short term and open up the potential to high yield when financial strain eases. However, due to higher rental prices it is still important to consider the possibility of an empty property as people are becoming more willing to relocate to find more affordable housing.


For a landlord that may be facing the challenge of an empty property, or cannot keep up with other challenges such as maintenance, looking into a scheme such as Guaranteed Rent could be a good route to go down particularly with the instability faced. Guaranteed Rent Schemes offer a fixed rental income, meaning the worry of an empty property does not apply. You can find out many more benefits of a Guaranteed Rent Scheme at Elliot Leigh Guaranteed Rent.

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