Landlords selling rental homes as tax rises and new rules bite rent increases likely

Landlords across the country are rushing to sell off their rental properties as mounting tax burdens and incoming renters’ rights reforms fundamentally reshape the buy to let market. Research indicates that years of increasing costs imposed by successive governments have steadily eroded investor appetite for residential property. Stamp duty on new buy to lets first rose in 2016 and mortgage interest relief was then gradually phased out. More recent Conservative government actions like the 2023 capital gains tax allowance cut and a further hike in stamp duty last year under Labour have left many landlords reconsidering their positions.

Current speculation that the new Labour chancellor Rachel Reeves could extend national insurance charges to landlords’ rental income is compounding investor concerns. Representatives from the National Residential Landlords Association warn that raising taxes is unlikely to benefit renters. Despite some improvements in supply there remain an average of 11 renters competing for every available property according to Rightmove with tenant choice continuing to diminish. Any further tax hikes risk suppressing investment in the sector even further and pushing rents higher.

Latest figures from the Royal Institution of Chartered Surveyors reveal new rental listings are dropping at the fastest pace since the pandemic lockdowns of 2020. The organisation predicts average rents will rise by three per cent in the next twelve months as tenant competition intensifies. Data from Hamptons also shows that buy to let investors account for just 10 per cent of all property purchases this year down from nearly 16 per cent ten years ago.

Evidence of a landlord exodus is backed by official HMRC statistics. The number of residential property sales incurring capital gains tax more than doubled between 2016 and 2024. As a share of total residential sales these transactions have climbed from under 10 per cent to more than 18 per cent. Many sales originate from both landlords and second home owners both groups targeted by recent tax policy changes.

Mortgage repossessions among buy to let investors are also up eleven per cent year on year according to UK Finance figures. Survey data suggests over a quarter of landlords have sold at least one property in 2024 compared to only eight per cent who have bought. Market analysts believe that while large scale professional landlords are likely to endure these regulatory headwinds many smaller or “amateur” landlords will continue leaving the sector.

Government plans to introduce tougher renters’ rights legislation threaten to further reshape the landscape. The bill which is advancing through parliament will end “no fault” evictions and strengthen rights to challenge rent hikes while raising the bar on energy standards for let properties by the next decade. As a result supply pressures look set to persist while rents keep climbing a trend that appears unlikely to reverse without significant policy intervention.