One in five landlords have sold up, buying agent warns as market faces two-tier squeeze

One in five private landlords in a central London management portfolio have sold or tried to sell in the past three years as rising costs and heavier regulation push smaller investors out of the rental market, a leading buying agent said.

Jo Eccles, founder and managing director of Eccord, a property search and management firm specialising in central London, said her in-house team manages about 150 properties and has seen an accelerating flow of disposals that is "really concerning" for rental supply.

Eccles told the Daily Mail that landlords are being squeezed by multiple cost pressures, including higher mortgage rates, increased taxes and service charges, rising labour and repair costs, and more complex regulatory obligations. Those factors have reduced net returns on many buy-to-let investments, particularly in London, where net yields are commonly around 1 to 1.5 percent and often fail to cover costs.

The exit of small private landlords matters for housing supply because roughly one-third of households in the U.K. rent privately. Institutional landlords tend to concentrate on larger build-to-rent projects, Eccles said, but a broad mix of private landlords is needed to provide a wide range of rental homes.

On the housing market outlook, Eccles expects average house prices to remain largely flat over the next 12 months, with notable exceptions. She said turnkey properties that require no refurbishment are being snapped up at a premium while homes needing work are lingering, creating a two-tier market.

"People are still very reluctant to do renovation and refurbishment work due to the timescales and costs," Eccles said. "That is creating a market where pristine, move-in-ready properties outperform." She advised buyers to be strategic about internal proportions, location and future marketability, recommending buyers consider better-quality stock a step further out rather than average stock closer in.

On mortgage rates, Eccles said that the lowest fixed deals may settle around 3.5 percent in a year, and that major moves in either direction are unlikely unless inflation resurges. Many buyers who delayed purchases while waiting for larger rate cuts have begun proceeding despite only modest falls in borrowing costs.

Looking further ahead, Eccles described the 10-year outlook as difficult to predict given recent shocks — Brexit, the COVID-19 pandemic, war in Europe and an inflation crisis. She said unemployment above current levels, with some forecasts near 5 percent, would likely dent consumer confidence and curb housing demand.

Eccles also questioned the feasibility of the government’s 1.5 million homes target, pointing to slow planning processes, construction costs she estimated have risen about 30 percent, and weak affordability for first-time buyers. She said private developers will hold land rather than build if they cannot be confident of achieving acceptable profit margins.

The weakness in buy-to-let returns has practical consequences for investors. Eccles noted higher risks from void periods and tenant non-payment or property damage, and she compared low net rental yields unfavourably with the returns available from low-risk government bonds. Nevertheless, some clients still favour property for its tangibility, she said, and certain locations overseen by major institutional freeholders or developers have demonstrated long-term capital preservation and growth.

Eccles cited the Howard de Walden estate’s transformation of Marylebone, Cadogan’s stewardship of parts of Chelsea, and CapCo’s work in Covent Garden as examples of places where sustained institutional investment raised and protected values over time. Those kinds of estates, she argued, effectively underwrite the long-term prosperity of a location.

On the debate between new-build and period homes, Eccles said both types can be good investments but warned of particular risks in modern developments: oversupply, cladding issues and rising service charges driven by amenities such as gyms and pools that push up monthly costs. Period properties, she added, can offer scarcity value and attractive features such as high ceilings and light in well-laid-out first-floor flats.

Eccles urged buyers to understand seller motivations when making offers, noting that credibility and relationship with the selling agent can be as important as price. She recounted a case in which personal detail about a client’s connection to the neighbourhood helped secure a property for less than a competing bid.

For those remortgaging, Eccles recommended acting early, comparing rates and speaking to brokers. Borrowers can often lock in a new deal six to nine months before a current fixed rate ends, sometimes adding arrangement fees to the loan, though that can increase total interest costs over the term. She warned that buy-to-let landlords on interest-only loans face particularly steep jumps in monthly payments when they remortgage.

Eccles said policymakers and the mortgage market will play a key role in near-term outcomes for housing and renting. The continuing reduction in small private landlords would reduce the diversity of rental stock unless countered by policy changes or different market incentives. With the Budget and broader economic indicators such as unemployment and inflation still in focus, she said the coming months will be important for both buyers and landlords to assess risk and plan accordingly.