‘Weakened’ smaller landlords at risk as costs, taxes and red tape rise
The resolve of many landlords is being ‘tested more than ever’ and only the bravest are likely to expand in the current environment, says Savills.
A new report from Savills warns that many landlords don’t have the turnover or profits to withstand recent financial and regulatory pressures as costs have risen, taxes have been increased and soon, their ability to evict tenants or raise rents severely curtailed.
According to its analysis of HMRC data, the revenue figures for smaller landlords, in particular, don’t stack up and as 45% have just one property and a further 37% have between two and four, that is a significant proportion of the rental sector.
£5,700 profit
In 2022–23, private individual landlords generated a total profit of over £25.6 billion on a turnover of £50.2 billion, and the average private individual landlord had a gross income of £17,665.
That equates to an average profit of just £9,021, after finance costs of £2,799, and other elements are deducted. However, where mortgage debt is higher, average profits fell to as low as £5,700.
Landlords selling
The report’s authors, Lucian Cook and Amelia Greene, say that only tells part of the story, because as many as 51% of private landlords reported gross income of under £10,000. And, for them, the decision about what to do next is very simple: hold or, increasingly, sell, and that means that ‘only the bravest are likely to expand in the current environment.’
Head of Residential Lettings, Savills
At the opposite end of the scale, larger landlords are more likely to have incorporated their lettings businesses, and, although they receive around one-third of the gross property income received by private individuals, they have more options.
That’s because they have the ability to restructure their portfolios to future-proof them, or they can take advantage of the opportunities arising from other players exiting the sector.
Additional data in the report from UK Finance shows that some are already doing so. In the year to April 2019, the average size of a portfolio for a mortgaged buy-to-let investor was 3.5 properties, whereas, in the year to April 2025, this had risen to 5.0, with the gross yield they have bought into rising from 6.0% to 7.0%.
