Buy-to-let landlords selling up make a £80,000 average profit

Times may be tougher for Britain’s landlords but new figures suggest the blow of selling up for many has been softened by years of house price gains. 

Figures released today from estate agents Hamptons International show that landlords who sold a buy-to-let property in England and Wales last year did so for £79,770 more than they paid for it.

But that hefty profit is overshadowed by the sums landlords are making in London – the most profitable area to sell up – where the average investor cashing in rakes in £248,120.

That is 21 times the profit made by landlords in the North East, who made the smallest average gain of £11,810.

Tighter regulations and a tougher tax regime are squeezing many property investors out of the sector – or forcing them to sell up in London and the South East and reinvest elsewhere in search of better yields.

But while a crackdown on tax relief and higher investment costs may have taken their toll on landlords’ appetite to invest today, rapid house price growth over the past 10 years has left long-term landlords with properties worth far more today than when they bought them. 

This has left investors with a significant profit, even once capital gains tax is taken into account. 

However, it looks like the perfect time to cash in might have passed. The £79,770 average figure is £3,660 less than the £83,430 average gross gain landlords made per property in 2017. 

Most landlords are still making a profit; last year, 85 per cent of landlords sold their buy-to-let for more than they paid for it, with just 15 per cent making a loss.

As with all things housing related, the figures vary widely based on region. 

Landlords who sold up in London last year made the biggest gain at £248,120, having owned their property for 9.6 years on average.

This was still £24,000 less than they would have made had they sold the year before.

Landlords who sold their buy-to-let in the North East, meanwhile, made the smallest average gain of £11,810, some £4,270 less than in 2017. 

There were just four local authorities in England and Wales where landlords were more likely to sell their buy-to-let for less than they paid for it last year – South Tyneside, where just 49 per cent made a profit, Sunderland at 48 per cent, Darlington at 45 per cent, and Middlesbrough at 43 per cent.

Landlords selling in Kensington and Chelsea made the biggest pre-tax profit, averaging £1,072,880, having owned their property for 10.6 years on average. 

Aneisha Beveridge, head of research at Hamptons International, said: ‘The average landlord who sold their buy-to-let last year did so for nearly £80,000 more than they paid for it. 

‘But given lower expected future house price growth and tighter mortgage regulation, more investors are shifting their focus from capital gains to yields. 

‘Rental growth accelerated to 2.1 per cent in Great Britain last month, the highest level since January 2018. This was driven by a 3.9 per cent year-on-year increase in London rents.’

This isn’t to say that everything is rosy in the buy-to-let space. In fact, in the past month repeated studies have found that landlords are increasingly leaving the market as a combination of recent tax and regulatory changes squeeze the sector. 

Figures released this week by the Royal Institution of Chartered Surveyors confirmed the extension of the longest uninterrupted sequence of falling landlord instructions since records started in 1998, while a Residential Landlords Association study found last week that a quarter of private landlords are looking to sell at least one property over the next year. 

Data released last week from the UK’s banking trade body UK Finance suggests that more and more landlords are falling behind on their mortgage payments.  

There were 4,620 buy-to-let mortgages in arrears of 2.5 per cent or more of the outstanding balance in the first three months of the year, 3 per cent greater than in the same quarter of the previous year. 

Within the total, there were 1,200 buy-to-let mortgages with more significant arrears, representing 10 per cent or more of the outstanding balance. 

This was 12 per cent greater than in the same quarter of the previous year.

Some 570 buy-to-let mortgaged properties were repossessed in the first three months of the year, 14 per cent fewer than in the same quarter of the previous year. 

Jeremy Leaf, estate agent and a former RICS residential chairman, said: ’The softening in the housing market is reflected in these figures, particularly for buy-to-let landlords who are falling into arrears from the pressure of tax and regulatory changes, as we might have expected.’