Retiring Landlords in the UK are Leaving a Gap in the Market for New Investors

Landlords who purchased properties soon after the launch of the first buy-to-let mortgage in 1996 are retiring in increasing numbers, according to new data released by Hamptons. 

The resulting sales of properties could impact the rental market, as the gap left by these retiring investors may not be easily filled by new investors, the agency said. 

The changing dynamics of the buy-to-let market, along with the evolving needs of an ageing population of landlords, are likely to shape the future of the rental sector in the coming years.

With the average landlord now aged 60, it’s predominantly these older investors who are exiting the market, resulting in around 140,000 landlords retiring in 2022 alone, accounting for nearly three-quarters (73%) of all landlord sales.

This trend is expected to continue in the coming years, as approximately 96,000 landlords are projected to turn 65 each year across Great Britain. In addition, there are already nearly one million landlords (924,000) who are over the age of 65. 

Over the past 12 years, between 2010 and 2022, the number of landlords retiring annually has doubled as their demographic ages.

The properties purchased by these landlords 15 to 25 years ago following the introduction of the buy-to-let mortgage still make up most privately rented homes in Great Britain. Just over half (51%) of the current total number of outstanding buy-to-let mortgages were taken out between 1996 and 2007. 

It is this cohort of ageing investors who bought properties during the rapid growth of the sector that are now increasingly likely to sell and cash out, leaving a gap that is not being filled by new landlords entering the market.

Recent investor sales reflect the ageing profile of landlords. In 2023, 45% of homes sold by landlords were bought at least 15 years ago, a figure that has risen each year since 2018 when it stood at just 33%. This proportion is expected to continue rising as more landlords reach retirement having purchased their buy-to-let properties a couple of decades ago.

The data also reveals that many of the first buy-to-let mortgages were used to purchase new low-rise city centre flats, which form the largest proportion of sales by today’s long-term landlords. 

Suburban London tops the list, with 60% of landlord sales in Redbridge having been owned for 15-plus years, followed by 59% in Ealing, 58% in Harrow, 55% in Barnet, and 53% in Enfield.

While age tends to be the primary trigger for selling properties, in many cases, the decision to sell has been compounded by lower-than-average returns, exacerbated by higher interest rates. 

An investor who bought a property 20 years ago was achieving a gross yield of 4.3% relative to their sale price, compared to a landlord buying today who is achieving 6.1%. This implies that in many cases, these landlords are selling homes where long-term tenants were paying rents that have slipped below market rates.