The average buy-to-let investor who sold property in 2023 has reported gains of £95,000, which is £10,000 less than in 2022, research has found. This marks a year-on-year decline in gains by 10.1%, according to data from Hamptons & Land Registry.
The decline is widespread across England & Wales, with investors in every region recording smaller gains than last year. The North of England has been particularly hard hit, experiencing the largest drop in gross returns on sales.
Overall, 6% of landlords sold their buy-to-let properties for less than what they paid for them, up from 5% in 2022. Furthermore, 19% of investors selling flats and 22% of investors in the North East sold for less than they paid.
Despite the drop in capital gains, the rental market continues to boom. Rents across Great Britain rose by 9.9% compared to last year, marking the 27th consecutive month where rental growth has been above 5%.
The average landlord in England & Wales sold their buy-to-let this year for £94,800 more than their purchase price, having owned the property for an average of 11 years. This is a significant drop from the record £105,300 gain last year and is reminiscent of the figures achieved by landlords selling in 2016.
For the first time since 2020, gains from property sales by landlords fell year-on-year in every region. The largest falls were recorded in northern regions, reflecting both slowing price growth and a shift in the types of homes being sold. Smaller terraced houses and flats, which have seen weaker price growth, made up a higher share of sales this year.
In contrast to the falling figures, investors in the North East recorded a whopping 176% increase in the average capital gain on the sale of a buy-to-let between 2016 and 2023. All three northern regions boasted a 50%+ increase in gains since 2016, as house prices in Northern England have risen the most over the last seven years.
London landlords continue to see the largest gross capital gains, with an average figure of £308,500 this year, despite being down by 3.4% from £319,300 last year. Only three regions – London, South East, and East – are reporting six-figure profits, with the South West falling off the list as gains shrunk to £95,700 from £105,000 in 2022.
With house prices starting to fall back, landlords looking to sell may have missed the market peak. Yet, record-breaking rental growth is providing some comfort.
Aneisha Beveridge, head of research at Hamptons, said: “Lower house prices and higher rents will combine to shore up the rental market as more landlords hold off on the decision to sell. On the flip side, this will also weigh down on the Government’s capital gains receipts handed over by landlords selling up over the next few years.”
The average rent for newly let properties in Great Britain now stands at £1,282 per calendar month, reflecting a year-on-year increase of 9.9%. This ongoing growth, combined with the dip in capital gains, provides a complex picture of the 2023 property market, reflecting both challenges and opportunities for investors and renters alike.
