With rents rising and high demand being consistent throughout 2023, you may be confused as to why you might consider selling a buy-to-let property right now.
As Homelet reports, rents have risen by 9.9% annually in April 2023, so buy-to-let landlords are making more rental income than ever, but various market factors are leading investors to consider getting out of the buy-to-let market:
Rising House Prices
The first of these factors is actually a positive, as many investors are choosing to sell their buy-to-let properties to take advantage of how house prices have risen in recent years.
Capital growth is a big reason why people choose to invest in buy-to-let property, meaning the profit you make from selling a property after it has risen in price over time.
House prices have risen to record highs in late 2022, and continue to show signs of growth in 2023. The most recent data from the Land Registry indicates that house prices rose annually by 5.5% from February 2023.
Buy-to-let investors can sell their properties to make major profits through capital growth, making it one of the main reasons why people choose to sell. This is a key factor to why buy-to-let is a good investment in 2023.
Rising Mortgage Interest Rates
Another reason why investors are choosing to sell in 2023 is the issues stemming from rising mortgage interest rates.
Many choose to purchase their investment properties using buy-to-let mortgages, where they make repayments on the accrued interest over the term of the mortgage and only pay back the amount borrowed at the end of the term.
In March 2022, the average interest rate for a buy-to-let mortgage was 3.2%, whereas in February 2023 it was 5.91% according to Which.co.uk, a massive increase.
This was mainly because of the September mini-budget unveiled by the government, which caused the pound to drop in value, leading many to believe that the cost of borrowing would rise sharper than expected. Many lenders pulled their mortgage deals while others chose to inflate their interest rates.
Because of this, some investors are struggling to make their mortgage repayments, leaving them no alternative but to sell their buy-to-let property.
No More Tax Relief
Until September 2017, buy-to-let landlords were able to claim tax relief on their mortgage repayments, saving them a considerable amount of money.
Basic rate taxpayers could claim up to 20% as tax relief, while additional rate taxpayers could claim up to 40-45%.
With this no longer being available, many landlords chose to sell their investment properties as it hurt the financial viability of their properties.
Other Common Reasons
There are several other reasons why investors might want to sell their buy-to-let property, which we’ve listed here:
- Disruptive tenants who cause too much stress. It can be easier to sell the property than to get them out of it.
- Expensive vacancy periods where they are without rental income, leading them to lose money in the long run.
- Increased legislation has meant more time needs to be spent on administration, while landlords cannot charge admin fees. For those who use buy-to-let to supplement their day job, the added time this takes means it isn’t feasible.
As you can see, there are many reasons why you might consider selling a buy-to-let property, so lets get into how you might go about that.