At least 365,000 ‘timebomb properties’ will become loss-making by the end of 2023
A buy-to-let crisis will expose the landlords of 365,000 properties to losses next year and risks triggering a wave of property fire sales that could drive down house prices.
Hundreds of thousands of buy-to-let properties in England will become loss-making by the end of 2023, according to analysis by the consultancy Capital Economics, as landlords come to the end of fixed-rate mortgages and are forced to endure steep increases in their interest rates.
Experts said these “timebomb properties” will drive down house prices across the market even further, as landlords cut their losses and sell up.
The borrowing costs for a typical landlord coming to the end of a two-year fixed-rate buy-to-let mortgage in 2023 will more than double from 2.89pc to 6.3pc after the Bank of England repeatedly increased interest rates, according to Moneyfacts, an analyst.
For a landlord with a £150,000 loan, this would mean repayments rise from £361 a month to £788 – an increase of £427.
This rise in costs will easily wipe out the profit made by a typical landlord, which is £210 a month, or £2,526 a year, according to Hamptons estate agents.
This financial crunch has raised concerns about the health of the wider housing market, as a flood of cheap properties being listed for sale would place significant downward pressure on house prices.
On Friday one of the country’s biggest mortgage lenders, Halifax, warned house prices could fall by 8pc next year. Nationwide has previously stated its worst case scenario is a 30pc drop.
Clive Betts, Labour MP and chairman of the housing select committee, said: “Even if a portion of these properties are listed for sale, it will be a really major shock to the whole housing system.”
Capital Economics estimated 365,000 buy-to-lets will become loss-making by the end of 2023 as their current mortgage deals expire. There are about 4.5m rental homes in England, meaning losses will hit at least 8pc of stock – or one in 13 properties. A further 182,500 buy-to-let homes could becoming loss-making in 2024, if rates do not fall.
Landlords are already racing to sell. We Buy Property, a cash buyer, said there had already been a 70pc rise in landlords wanting to sell properties compared with last year.
Andrew Wishart, of Capital Economics, said: “Even those who will still make a positive cash return may consider selling up.”
It is the latest blow for landlords who have been repeatedly hit by unfavourable tax changes by ministers. The Government phased out tax relief on buy-to-let mortgages between 2017 and 2020, which meant landlords with properties in their own names could no longer offset all of their interest payments. Mr Betts added: “Most people pay tax on their profits, landlords pay tax on their earnings.”
Plans to introduce new minimum energy performance certificate requirements for landlords will also require many to carry out expensive improvements.
Matthew Jackson, of Mint Financial Services, an adviser, said landlords were sitting on “timebomb properties”. The collapse of the buy-to-let market also has repercussions for tenants, who could find themselves evicted if owners leave the market.
The wealthy landowning class just never catch a fucking break, do they? 😂
Sadly, if they sell, they’re unlikely to suffer. It’s the tenants who will come off worst. Forced moves.
“Investments can go up or down. Your capital may be at risk.”
“After many years of absolutely fucking raking it in, landlords are faced with a year where they may make little profit, or a loss. Won’t somebody think of the poor landlords?”
So for those thinking this is going to impact the wealthy landlord the most are wrong. The wealthy ones can afford to purchase the properties outright, and will. It’s going to have a significant impact on those trying to start out or the middling landlords that need to get a mortgage for their properties.
But all in all, I for one think it’s a good thing house prices are finally falling. My generation could work their entire lives in a high paying job on dual income and still not be able to afford anything as nice as my grandparents on a single working class income did.
Or what is also likely to happen are rents will go up.
It may sound odd, but my goodness I want the economy to collapse. The banks have ran a mock, the rich have plunged us plebs for all we have, and we’ve destroyed the environment doing so. Linear growth has failed, need to rethink our financial modules and maybe go to a circular economy.
I mean, for me and everyone I know who currently has no hope in hell of buying a property, a 30% drop in house prices is anything but a bad thing. But thanks for your take Nationwide.
Houses should not be investments. Houses should be a relatively stable asset that roughly match wage increases or interest rates. Otherwise eventually no one will be able to afford a house as the investment continually out paces wages, as it has done for decades already. The housing market needs a stagnation in price or steady decline for several years to correct the current disparity between wages and house prices
To be honest, it’s easier to get a buy to let mortgage than a mortgage for a home to live in. I had a look at buying a rental property a while ago and assumed it would be too expensive and too difficult, it turned out to just be a bit of a thought experiment, but I did learn you needed just the things…. A household income over £25k… 10% deposit and a 15% yield on the property. If I had bought back then interest rates would of been 2% but now are floating around 7%. To cover that price rise the rent would of had to increase by 50% or I would of needed to sell.
>On Friday one of the country’s biggest mortgage lenders, Halifax, warned house prices could fall by 8pc next year.
An 8 percent drop per year is a good thing – and I say this as a homeowner. Property is so overpriced that it urgently needs to fall, and nobody is hitting negative equity over 8%.
Prices falling a lot faster than that could have some pretty awful consequences for a lot of people though, and the economy as a whole.
[deleted]
Win-win
Landlords love giving their entitled views to papers; we love reading these stories in outrage!
The banks never lose out, they’ll keep the houses and become the landlords. Blackrock already own thousands, the rest of the finance sector will make a killing on this
It’s almost as if investments can go up or, gasp, down.
Hey, maybe then I can finally afford a one bedroom studio flat of my own.
Obviously the UK has a long history of boom and bust in the housing market, it’s all we are good at in the UK. What’s different this time is the buy to let market. I haven’t got a clue what will happen.
> “Most people pay tax on their profits, landlords pay tax on their earnings.”
Isn’t this a lie? Landlords aren’t taxed on gross earnings, they can still deduct repairs and other expenses natural to being a landlord. They just can’t treat a mortgage as an expense.
Oh no! Not the landlords! Won’t somebody please think of the landlords?! Britain’s hardest working people!
Here come the corporate landlords to scoop everything up at a mega discount
Landlords afraid because house hoarding now slightly less profitable.
If this happens then this will only lead to the big corporate players and cash rich snapping these up. They won’t, on the whole, translate into owner occupied housing stock. Restrictive lending policy and high interest rates will see to that.
It will still be buy to let but with much less competition. A terrible development for tenants and the market as a whole.
Maybe they should try pulling themselves up by the bootstraps and looking for a job
I was wondering what that noise was this morning, it was a quartet of the world’s smallest violins.
People always like to celebrate small holding landlords being screwed but the alternative is higher rent from larger companies or landlords with a huge number of properties. Both of which will result in much higher rent for tenants.
30% drop aint going to happen. There is record high rental demand, only the most reckless landlords that rely on the income will sell up. Most of these properties will make a loss but if these are investments then the landlords will stump up the gap for the foreseeable.
“Most people pay tax on their profits, landlords pay tax on their earnings.”
Don’t recall the government asking about my profits before taking income tax and national insurance off me.
our apartment has had no cooker for 363 days, and this is the third winter without regular hot water.
Despite this, the courts are threatening ME, but the landlord gets away scot free.
FK the landlord.
House price crash having an impact on landlords sounds like great schadenfreude as a headline.
All that’s gonna happen though is small over leveraged landlords will collapse and that housing stock will get gobbled up by bigger established landlords with the capital to weather the storm.
People thirsting to get onto the property ladder have already had their savings raided with the energy crisis, cost of living crisis, fuel crisis, pound crashing e.t.c. e.t.c.
Very few “little guys” will win out of this and yet more wealth will get consolidated by the few who already have more than they’ll ever need.
I have no sympathy at all. Same goes for the Airbnb businesses
I don’t think people realise that it isn’t the landlords suffering here. As people keep pointing out, investments can go up or down. If they go down and you decide it’s not worth it any more, you sell up and invest elsewhere.
All this means is that landlords will just take their money elsewhere.
There might be some benefits for those renters who can already afford to buy as prices drop, however mortgages are getting less affordable at the same time.
For those renters who can’t afford to buy, this just means that rental supply dries up and prices rise.
TL/DR, this won’t hurt the landlords. This will hurt renters.
31 comments
At least 365,000 ‘timebomb properties’ will become loss-making by the end of 2023
A buy-to-let crisis will expose the landlords of 365,000 properties to losses next year and risks triggering a wave of property fire sales that could drive down house prices.
Hundreds of thousands of buy-to-let properties in England will become loss-making by the end of 2023, according to analysis by the consultancy Capital Economics, as landlords come to the end of fixed-rate mortgages and are forced to endure steep increases in their interest rates.
Experts said these “timebomb properties” will drive down house prices across the market even further, as landlords cut their losses and sell up.
The borrowing costs for a typical landlord coming to the end of a two-year fixed-rate buy-to-let mortgage in 2023 will more than double from 2.89pc to 6.3pc after the Bank of England repeatedly increased interest rates, according to Moneyfacts, an analyst.
For a landlord with a £150,000 loan, this would mean repayments rise from £361 a month to £788 – an increase of £427.
This rise in costs will easily wipe out the profit made by a typical landlord, which is £210 a month, or £2,526 a year, according to Hamptons estate agents.
This financial crunch has raised concerns about the health of the wider housing market, as a flood of cheap properties being listed for sale would place significant downward pressure on house prices.
On Friday one of the country’s biggest mortgage lenders, Halifax, warned house prices could fall by 8pc next year. Nationwide has previously stated its worst case scenario is a 30pc drop.
Clive Betts, Labour MP and chairman of the housing select committee, said: “Even if a portion of these properties are listed for sale, it will be a really major shock to the whole housing system.”
Capital Economics estimated 365,000 buy-to-lets will become loss-making by the end of 2023 as their current mortgage deals expire. There are about 4.5m rental homes in England, meaning losses will hit at least 8pc of stock – or one in 13 properties. A further 182,500 buy-to-let homes could becoming loss-making in 2024, if rates do not fall.
Landlords are already racing to sell. We Buy Property, a cash buyer, said there had already been a 70pc rise in landlords wanting to sell properties compared with last year.
Andrew Wishart, of Capital Economics, said: “Even those who will still make a positive cash return may consider selling up.”
It is the latest blow for landlords who have been repeatedly hit by unfavourable tax changes by ministers. The Government phased out tax relief on buy-to-let mortgages between 2017 and 2020, which meant landlords with properties in their own names could no longer offset all of their interest payments. Mr Betts added: “Most people pay tax on their profits, landlords pay tax on their earnings.”
Plans to introduce new minimum energy performance certificate requirements for landlords will also require many to carry out expensive improvements.
Matthew Jackson, of Mint Financial Services, an adviser, said landlords were sitting on “timebomb properties”. The collapse of the buy-to-let market also has repercussions for tenants, who could find themselves evicted if owners leave the market.
The wealthy landowning class just never catch a fucking break, do they? 😂
Sadly, if they sell, they’re unlikely to suffer. It’s the tenants who will come off worst. Forced moves.
“Investments can go up or down. Your capital may be at risk.”
“After many years of absolutely fucking raking it in, landlords are faced with a year where they may make little profit, or a loss. Won’t somebody think of the poor landlords?”
So for those thinking this is going to impact the wealthy landlord the most are wrong. The wealthy ones can afford to purchase the properties outright, and will. It’s going to have a significant impact on those trying to start out or the middling landlords that need to get a mortgage for their properties.
But all in all, I for one think it’s a good thing house prices are finally falling. My generation could work their entire lives in a high paying job on dual income and still not be able to afford anything as nice as my grandparents on a single working class income did.
Or what is also likely to happen are rents will go up.
It may sound odd, but my goodness I want the economy to collapse. The banks have ran a mock, the rich have plunged us plebs for all we have, and we’ve destroyed the environment doing so. Linear growth has failed, need to rethink our financial modules and maybe go to a circular economy.
I mean, for me and everyone I know who currently has no hope in hell of buying a property, a 30% drop in house prices is anything but a bad thing. But thanks for your take Nationwide.
Houses should not be investments. Houses should be a relatively stable asset that roughly match wage increases or interest rates. Otherwise eventually no one will be able to afford a house as the investment continually out paces wages, as it has done for decades already. The housing market needs a stagnation in price or steady decline for several years to correct the current disparity between wages and house prices
To be honest, it’s easier to get a buy to let mortgage than a mortgage for a home to live in. I had a look at buying a rental property a while ago and assumed it would be too expensive and too difficult, it turned out to just be a bit of a thought experiment, but I did learn you needed just the things…. A household income over £25k… 10% deposit and a 15% yield on the property. If I had bought back then interest rates would of been 2% but now are floating around 7%. To cover that price rise the rent would of had to increase by 50% or I would of needed to sell.
>On Friday one of the country’s biggest mortgage lenders, Halifax, warned house prices could fall by 8pc next year.
An 8 percent drop per year is a good thing – and I say this as a homeowner. Property is so overpriced that it urgently needs to fall, and nobody is hitting negative equity over 8%.
Prices falling a lot faster than that could have some pretty awful consequences for a lot of people though, and the economy as a whole.
[deleted]
Win-win
Landlords love giving their entitled views to papers; we love reading these stories in outrage!
Oh, thats a pity.
Hahahahahahahaahahahahahahahahahahahahahahahahaha!
The banks never lose out, they’ll keep the houses and become the landlords. Blackrock already own thousands, the rest of the finance sector will make a killing on this
It’s almost as if investments can go up or, gasp, down.
Hey, maybe then I can finally afford a one bedroom studio flat of my own.
Obviously the UK has a long history of boom and bust in the housing market, it’s all we are good at in the UK. What’s different this time is the buy to let market. I haven’t got a clue what will happen.
> “Most people pay tax on their profits, landlords pay tax on their earnings.”
Isn’t this a lie? Landlords aren’t taxed on gross earnings, they can still deduct repairs and other expenses natural to being a landlord. They just can’t treat a mortgage as an expense.
Oh no! Not the landlords! Won’t somebody please think of the landlords?! Britain’s hardest working people!
Here come the corporate landlords to scoop everything up at a mega discount
Landlords afraid because house hoarding now slightly less profitable.
If this happens then this will only lead to the big corporate players and cash rich snapping these up. They won’t, on the whole, translate into owner occupied housing stock. Restrictive lending policy and high interest rates will see to that.
It will still be buy to let but with much less competition. A terrible development for tenants and the market as a whole.
Maybe they should try pulling themselves up by the bootstraps and looking for a job
I was wondering what that noise was this morning, it was a quartet of the world’s smallest violins.
People always like to celebrate small holding landlords being screwed but the alternative is higher rent from larger companies or landlords with a huge number of properties. Both of which will result in much higher rent for tenants.
30% drop aint going to happen. There is record high rental demand, only the most reckless landlords that rely on the income will sell up. Most of these properties will make a loss but if these are investments then the landlords will stump up the gap for the foreseeable.
“Most people pay tax on their profits, landlords pay tax on their earnings.”
Don’t recall the government asking about my profits before taking income tax and national insurance off me.
our apartment has had no cooker for 363 days, and this is the third winter without regular hot water.
Despite this, the courts are threatening ME, but the landlord gets away scot free.
FK the landlord.
House price crash having an impact on landlords sounds like great schadenfreude as a headline.
All that’s gonna happen though is small over leveraged landlords will collapse and that housing stock will get gobbled up by bigger established landlords with the capital to weather the storm.
People thirsting to get onto the property ladder have already had their savings raided with the energy crisis, cost of living crisis, fuel crisis, pound crashing e.t.c. e.t.c.
Very few “little guys” will win out of this and yet more wealth will get consolidated by the few who already have more than they’ll ever need.
I have no sympathy at all. Same goes for the Airbnb businesses
I don’t think people realise that it isn’t the landlords suffering here. As people keep pointing out, investments can go up or down. If they go down and you decide it’s not worth it any more, you sell up and invest elsewhere.
All this means is that landlords will just take their money elsewhere.
There might be some benefits for those renters who can already afford to buy as prices drop, however mortgages are getting less affordable at the same time.
For those renters who can’t afford to buy, this just means that rental supply dries up and prices rise.
TL/DR, this won’t hurt the landlords. This will hurt renters.