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More than one in 10 homes for sale are now former rentals, according to new research from Zoopla, and this is pushing down sales prices for every property.
Its figures show that prices have fallen by 1.3 percent over the last six months as the supply of properties increases.
So far, we have escaped a crash but the market remains on a knife edge with mortgage rates set to rise higher.
Following last week’s shock inflation figure for April, which showed core prices rising rather than falling, the Bank of England may hike base rates to six per cent or beyond.
The BoE has already hiked bank rate 12 times in a row to 4.5 percent and is expected to lift them again at its next meeting on June 22, with more to follow.
This will make life harder for more than a million homeowners on variable rates and another 1.3million whose fixed rate deals end this year.
Many will have to pay hundreds of pounds more for their mortgage every month. Some could become forced sellers, which would further boost supply.
Mortgage lenders are running scared, fearing defaults.
The Money Charity’s aptly named report, Snapshot of UK Mortgages in Crisis, says fewer people are now applying for mortgages and fewer being approved for them.
Chief executive Michelle Highman said some homeowners are paying twice as much for the mortgage as they were last year. “Many will struggle to cover that kind of increase, especially with other costs also rising.”
Now buy-to-let landlords are running scared, too. Their mortgage costs may also rise and many fear for their mental health.
For 20 years, buy-to-let was a brilliant investment, as the growing army of amateur landlords enjoyed rising income from rentals and capital growth from spiralling house prices.
Borrowing costs were ultra-low and they could claim full tax relief on their interest repayments, too.
Since 2016 that tax relief has been scaled back, and buy-to-let investors have to pay a three percent surcharge on property purchases, too.
Now Levelling Up secretary Michael Gove is tightening rules for the country’s 4.4million rental properties in a bid to drive out rogue landlords.
The new rules make it harder to evict tenants who cause damage or fall behind on the rent. Gove will also introduce compulsory rolling tenancies and new rights for renters to have pets.
If Labour win the next election, Keir Starmer is expected to double down on the landlord attack.
Experts have repeatedly warned the overhaul will backfire as landlords cut their losses and run, reducing the supply of rentals and driving up costs.
David Hannah, chairman of property tax experts Cornerstone Group International, said there’s now an “exodus” of buy-to-let landlords.
Its research shows just one in five landlords nnow say their investment is profitable, with a similar percent proportion losing thousands.
As a result, 65,000 rental properties went up for sale in the first three months of this year.
READ MORE: Buy-to-let crackdown punishes landlords, tenants and first-time buyers
Hannah says the sell-off does have a positive element, by making it easier for first-time buyers to get on the property ladder.
But it will make life even harder for tenants by reducing the supply of properties and driving up rents, which are already at a record high.
The average monthly rent outside of London has surpassed £1,000 for the first-time ever, according to Hamptons, after rising 7.8 percent in a year.
In London, rents soared 17.2 percent to a record £2,200 a month.
As costs escalate and financial pressures mount, buy-to-let landlords are off, Hannah said.
“The sharp rise in expenses, ranging from maintenance and management fees to taxation and regulatory burdens, has compelled some landlords to reassess their portfolios.”
First-time buyers have done battle with buy-to-let landlords for years, and often came off second best. The playing field has now been levelled a little.
Falling house prices may be exactly what we need, provided it doesn’t turn into a full-blown crash that would wreak economic havoc.
Either way, there is little comfort for tenants who have less choice but now have to pay even more for a roof over their head.
While there are rogue landlords out there, demonising the honest majority isn’t right. The housing shortage isn’t the fault of buy-to-let landlords, but they’re getting the blame.
