More than a third (38%) of My Auction’s current property auction lots are buy-to-let (BTL) investors looking to get out of the market quickly, new data from the online property specialist reveals.
Analysis from My Auction found that high-interest rates coupled with the cost-of-living crisis mean that the yields coming from rental properties are at an all-time low for the first time in 14 years.
With higher mortgage rates, it suggests that investor profit margins are squeezed and many BTL sellers are offloading stock that is no longer providing the necessary return.
However, the reason for leaving the BTL market is not solely down to profit margins.
Analysis shows that consistent changes in legislation and taxation surrounding landlords have made it difficult for some landlords to retain their investment properties regardless of the exponential yields.
My Auction records show that the most common type of property being sought by investors are two-bedroom flats (40%), followed by two- and three-bed houses (30%) and one-bedroom flats (15%).
Meanwhile, 15% of investment purchases have been houses of multiple occupancy (HMOs).
The latest analysis found that landlords with cash to buy will be the biggest winners in the current market.
Some landlords are willing to sell their investment property for up to 25% to 30% less than they might have sold for before, seeking the opportunity to get out of the market quickly.
Investment buyers are looking to achieve a rental yield of at least 8% for a property to be considered an attractive purchase.
My Auction co-founder and director Stuart Collar-Brown comments: “The interest rate rises have solidified and sped up the mass exodus of buy-to-let investors from the market.”
“However, other contributing factors, such as the consistent changes in legislation and taxation surrounding landlords in this section of the market, have made it almost unviable for some landlords to retain their investment properties.”
“Landlords who are cash rich have the added benefit of not being reliant on mortgage rate increases, so we are seeing many making lower offers due to their ability to transact very quickly in a falling market.”
“The expectation of landlords coming into the market now in terms of yield, has increased with many expecting a minimum of 8% which could equate to a reduction of as much as 25% compared with values this time last year.”
“Investors in London are looking for rental yields around 7% to 8% now, compared to 5% to 6% pre-pandemic, so those looking to exit the market are having to be far more realistic with their expectations compared with the peak of the market in August/September 2022.”
