Landlords hold off selling prime properties despite Renters’ Rights Act impact
Only 11% of landlords have sold a rental property since the Renters’ Rights Act came into force, according to a Savills survey of more than 230 landlords with prime properties.
Introduced on 1 May, the legislation has prompted some landlords to reconsider their portfolios, but the majority have yet to take action. Just 21% said they were more likely to sell within the next three months, rising to 27% over six months.
However, the longer-term outlook is more cautious. Almost half (46%) of landlords said they were more likely to sell within the next 12 months, increasing to 68% over 24 months.
Landlords scale back investment plans
The survey also found landlords are becoming increasingly hesitant about expanding their portfolios.
Savills found that 62% of landlords are significantly less likely to purchase another investment property over the next two years, with a further 10% somewhat less likely.
By comparison, just 5% said they were more likely to buy another property, while 23% expected no change to their plans.
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The impact of the Renters’ Rights Act has also been greater than many landlords anticipated, with 39% saying the reality had been worse than expected, compared with just 5% who said it had been better.
More than a third of landlords have already changed how they manage their portfolios in response to the legislation, while 11% have sold one or more rental properties.
Confidence around meeting new obligations remains mixed, with 24% of landlords saying they are not confident they understand their responsibilities under the act.
Rental demand supports growth in smaller prime properties
The prospect of fewer landlords entering the market comes as rental values continue to rise across much of the prime sector.
Savills’ analysis shows that limited supply and sustained tenant demand have supported rental growth, particularly among smaller properties in commuter belt locations.
Prime one- and two-bedroom properties in commuter belt markets recorded the strongest rental growth over the past decade, with rents rising by 38.7%.
This compared with growth of 32.7% for three-bedroom homes and 27.2% for four-bedroom properties.
Larger homes saw more modest increases, with rents for five-bedroom properties rising by 13.7% over 10 years, while six-bedroom-plus properties recorded growth of just 4.1%.
Regional markets outperform Prime Central London
Prime Central London has seen a more muted performance, with rents increasing by 0.4% in the quarter and standing just 1.5% higher year-on-year.
However, there has been a clear divide between properties above and below the £100,000 annual rental threshold, which is one of the factors determining whether a tenancy falls within the scope of the Renters’ Rights Act.
Outer prime London markets have generally performed better. In South West London, rents increased by 1.2% during the second quarter, with annual growth reaching 2.5%.
However, rental growth varied significantly depending on property type and price point, ranging from 3.2% for homes let at less than £500 per week to 1.2% for those above £3,000 per week.
The findings showed while landlords remain cautious about future investment decisions, demand for well-located smaller rental properties continues to support rental growth across the prime market.
