Hamptons is warning landlords disillusioned with buy to let that they may have missed the top of the sales market – and will therefore lose out on optimum capital gains.
The agency’s latest research suggests that buy to let sales so far in 2023 have on average made gains a full 10.1 per cent lower than those investors who sold last year
Overall, six per cent of landlords in England and Wales sold their BTL this year for less than they bought it for, up from five per cent last year. For landlords selling flats the figure was much higher – 19 per cent.
Hamptons says that far this year the average BTL unit for £94,800 more than its original purchase price, typically 11 years ago.This gain Is down 10.1 per cent from a record £105,300 last year.
In comparison to 2016, when Hamptons records began, investor profits have risen fastest and furthest in the north of the country. Investors in the North East recorded a 176 per cent increase in the average capital gain on the sale of a BTL between 2016 and 2023, with all three northern regions boasting a 50 per cent-plus increase in gains since 2016.
House prices in Northern England have risen the most over the last seven years, while in parts of London and the South East prices have remained static.
Even so, in cash terms London landlords who sold up still saw the largest gross capital gains – a healthy £308,500 on average. However, this number is down 3.4 per cent from £319,300 last year and 15 per cent down from a peak of £365,000 in 2016 due to slower price growth.
There are just three regions where the average investor profit is still at six figures – London, South East and East. The South West fell off that list this year when the average capital gain shrank from £105,000 in 2022 to £95,700 today.
And Hamptons warns that it is likely that the amount made by landlords selling up will fall further on the back of both lower prices being achieved and a rising proportion of sellers having bought later in the house price cycle.
Aneisha Beveridge, head of research at the agency, says: “As house prices start to slip back, there are signs that the landlords looking to sell today may have missed the top of the market. Rather, some investors are consoling themselves with record-breaking rental growth which is slowly ironing out the arithmetic for landlords.
“Lower house prices and higher rents will combine to shore up the rental market as more landlords hold off on the decision to sell. On the flip side, this will also weigh down on the government’s capital gains receipts handed over by landlords selling up over the next few years.”