"Larger landlords, or those with stronger systems in place to manage their properties, have not only capitalised on continued demand, but snapped up properties being sold off as others exited the market"
- Oliver Prior - Auction House UK
National property auctioneer Auction House recorded a 70% year-on-year increase in tenanted properties sold through its weekly online auctions in April, as buy-to-let landlords moved to exit the market ahead of the Renters' Rights Act coming into force on 1 May.
The surge has created what the group describes as a two-speed market. As smaller or less compliant landlords sold up, experienced investors stepped in to acquire their properties, in some cases at discounts of 30 to 40% below vacant possession value.
Research by Goodlord found that a quarter of landlords surveyed were actively selling or considering selling some or all of their portfolio.
The appetite for tenanted stock has been striking. A property in Newcastle recently attracted 86 bids in a single online auction, selling for £219,000 against a guide price of £115,000.
"This has presented a real opportunity for well-capitalised landlords who are prepared to adapt," said Oliver Prior, managing director of Auction House UK. "Larger landlords, or those with stronger systems in place to manage their properties, have not only capitalised on continued demand, but snapped up properties being sold off as others exited the market. We have seen this in action across our auction rooms nationwide."
A reshaping, not an exodus
Sam Harris, Auction House's regional manager covering South Yorkshire, Nottinghamshire, Derbyshire and the North East, has been watching the pattern closely. "I wouldn't characterise this as a wholesale exodus," he said.
"What we're seeing is more of a reshaping of the market. As some smaller or less compliant landlords sell up, there's been growing interest from more experienced and well-capitalised investors who are taking a longer-term view. These landlords tend to be more comfortable operating within a regulated environment and are often better equipped to manage tenancies effectively."
"In the current market, this shift has created some interesting opportunities. We've seen tenanted properties, even in desirable areas, selling at significant discounts, sometimes in the region of 30 to 40% below vacant possession value. For investors who understand the regulatory landscape and are prepared to adapt, there has been clear potential to acquire assets at attractive prices."
Philippa Martinez, regional sales manager for Auction House Kent, argues that many landlords reacted too hastily when the Act was announced.
"There was a bit of a knee-jerk reaction, which led to an influx of landlords looking to sell up quickly," she said.
"Some were afraid that they would end up stuck or unable to take their properties back into possession. Professional landlords who run their rentals as a business have been less affected as they were probably already playing by these new rules."
"Now, there is an attitude of waiting to see what happens. Some landlords may see that the new conditions were not as frightening as they first appeared. I believe this will tighten up the market giving the landlords that remain the chance to thrive."
The unintended cost to tenants
The sell-off has had direct consequences for rental supply, and by extension for the tenants the legislation was designed to protect. Prior was direct about the impact.
"The reduction in rental stock creates greater competition and pushes rental values up," he said.
"Forecasters are still estimating annual national rental growth of 3 to 6% this year, with tenant competition remaining above pre-pandemic levels. If the purpose of the Act was to support renters with the cost of housing, the result has been anything but."
Martinez shared that concern. "The initial big sell-up has tipped the balance of supply and demand once again," she said. "Extra costs incurred by landlords will also inevitably be passed back to the tenants. Housing supply across the board needs to be re-evaluated and a solution found to make buying or renting a home affordable to all."
Why landlords are choosing auction
Auction has emerged as a preferred exit route for departing landlords, offering speed of completion and the ability to sell tenanted properties without serving a last-minute Section 21 notice before 1 May. Competition for buy-to-let stock has been strong, particularly where guide prices are attractive, as the Newcastle result illustrates.
Looking ahead, Prior remained measured. "The Act marks a change in the private rental sector, but the impact should not be as severe as was initially feared," he said. "There is good opportunity for landlords who are prepared to adapt and make the most of it."
Harris agreed. "I think the Act will ultimately raise standards across the sector, which should be positive for both tenants and professional landlords. While it may deter those looking for short-term or hands-off investments, there will still be strong opportunities for landlords who are compliant, well-informed and focused on long-term portfolio growth."
