London’s property market is seeing a significant shift as the number of rental properties being listed for sale has reached its highest level in a decade. According to new data from TwentyCi, over a fifth of all newly listed homes for sale in Inner London were previously rental properties, marking a notable increase from 15.6% in July 2023 and 12.9% in July 2019, the last ‘normal’ year before the pandemic.
This trend is particularly concentrated in the capital, where the proportion of former rental properties being sold is far higher than the UK average of just 9%. The rising number of landlords selling their properties comes at a challenging time for the private rented sector (PRS).
Landlords facing increased pressures
Colin Bradshaw, Chief Executive Officer of TwentyCi, highlighted the pressures landlords are currently facing: “Aside from mortgage increases, landlords have growing fears around a possible rise in Capital Gains Tax and compliance demands for energy efficiencies. Overall, the rental sector has become much more expensive and unpredictable for landlords over the last decade.”
Bradshaw also pointed out the significant decline in available rental properties, stating, “Available properties to rent are at their lowest since TwentyCi has been recording data in the last 15 years, now at 276,000 in July 2024 for the whole of the UK, compared with 369,000 in July 2019—a reduction of more than 25%.”
Impact of upcoming legislation
The looming Renter’s Rights Bill is causing additional concern among London landlords, many of whom are worried about its potential impact on rental yields, which are already significantly below the UK average. In a recent Zoopla survey of 64 cities, London ranked 62nd, making it the worst-performing region by a considerable margin.
Many landlords choosing to sell now are likely doing so to avoid the potential increase in Capital Gains Tax rates, which could further erode their profits.
Broader implications for the London property market
The surge in rental properties being sold in London is a clear indicator of the mounting challenges facing landlords in the capital. With the private rented sector under pressure from rising costs, increased regulation, and legislative uncertainty, many landlords are opting to exit the market.
As this trend continues, it could lead to a further reduction in available rental properties, exacerbating the already tight supply in the capital. For landlords and property investors, the current landscape presents a complex set of challenges that will require careful navigation in the months and years ahead.
