London Landlord Exodus: A Growing Trend in 2024
The property market is shifting as the London landlord exodus grows, with more investors leaving in search of better returns. With increasing pressure on rental yields and mortgage costs, investors are re-evaluating their portfolios. This has led to a noticeable rise in landlords selling their properties in the capital, which is putting further strain on an already tight rental market.
London Landlord Exodus: A Decline in Rental Properties in London
Recent data shows a significant drop in the number of rental properties available in London. TwentyCi research indicates that more landlords are exiting the market, with many choosing to sell rather than continue renting. In July 2024, over a fifth (22%) of properties newly listed for sale in inner London had been rented out within the past decade. This is the highest level seen in ten years and marks a sharp increase from 15.6% in 2023 and 12.9% in 2019, highlighting the growing trend.
This reduction in available rental properties is exacerbating the housing crisis for tenants, with fewer options and higher rents becoming the norm. The supply and demand imbalance is expected to continue, further driving up rental prices.
Rental Yields: London vs. Other Regions
While London remains one of the most expensive cities to live in, both in terms of house prices and rental costs, landlords in the capital are finding that their returns are not as lucrative as they might have hoped. The average rent in inner London is now £2,399 per month, significantly higher than the UK average of £1,869. Despite this, rental yields in London are lower compared to other regions.
Research from property analysts has shown that the North of England offers much higher yields, with some areas achieving over 8%. By contrast, London’s average yield stands at just under 5%. For many investors, this disparity makes regions such as the North East and North West far more appealing.
The Impact of Mortgage Rates on Landlords
Rising mortgage rates are another major factor driving landlords out of London. While mortgage rates have stabilised somewhat in 2024, they remain higher than pre-pandemic levels. This has put additional pressure on landlords who rely on rental income to cover their mortgage payments.
The changes in tax relief on mortgage interest payments have further squeezed profits, making it harder for landlords to maintain the same levels of income. In regions where property prices are lower, such as the Midlands and the North, landlords can often purchase properties outright or borrow less, reducing their exposure to rising interest rates.
Exploring Alternatives: The North and Midlands
The shift away from London is being driven by the search for more affordable investment opportunities. Many landlords are now looking to diversify their portfolios by purchasing properties in the North or the Midlands, where house prices are lower, and rental yields are higher. The ability to buy properties outright or with lower mortgage levels reduces financial risk, making these regions more attractive.
London Landlord Exodus: Additional Factors Behind Landlords’ Departure
Beyond mortgage costs and rental yields, other factors are influencing landlords’ decisions to leave London. Potential changes in government policy, such as increases in capital gains tax and new regulations around energy efficiency standards, are making property investment more complicated and costly. These impending changes are prompting many landlords to reassess their position in the market and consider selling their London properties before the new rules come into effect.
The rental sector has become increasingly challenging for landlords over the past decade. According to experts, the market is now more unpredictable and costly than ever before. The number of rental properties available across the UK has dropped significantly, with a 25% reduction since 2019. As landlords continue to sell up, this trend shows no signs of slowing down.
A Changing Landscape for London’s Rental Market
The exodus of landlords from London is creating ripple effects throughout the city’s rental market. Fewer available properties and rising tenant demand will drive rental prices even higher. For many London residents, this means that finding affordable housing will become an even greater challenge.
At the same time, the departure of landlords presents opportunities for property investors willing to look outside the capital. Areas in the North and Midlands offer more promising returns, with lower property prices, higher yields, and reduced financial risks. For investors seeking long-term profitability, these regions are becoming increasingly attractive alternatives to London.
London Landlord Exodus: Looking Ahead
The trend of landlords leaving London in search of better opportunities elsewhere is likely to continue in the coming years. As the property market evolves, financial pressures on landlords are increasing. Consequently, more investors may explore regions with higher rental yields and manageable mortgage costs.
For tenants in London, the outlook is less optimistic, with fewer rental properties available and higher prices on the horizon. The supply crisis in the capital’s rental market shows no sign of easing, making it a challenging environment for both tenants and landlords alike.
