The latest research reveals that buy-to-let (BTL) landlords are increasingly making lower offers on properties as the housing market shows signs of softening. This trend is particularly significant for investors, who are capitalising on their chain-free status to negotiate better deals, with many offers falling well below the initial asking prices.
What Trends Are Emerging in BTL Purchases?
According to recent findings, BTL investors accounted for 14.1% of all property purchases in July, a notable increase from the year-to-date average of 12.4%. This uptick suggests that landlords are taking advantage of current market conditions to expand their portfolios. The willingness of these investors to make lower offers has become more pronounced, with the average BTL investor paying just 88.7% of the initial asking price.
How Low Are Landlords Willing to Go?
Hamptons’ research indicates that 56% of offers made by BTL investors were at least 10% lower than the original asking price, marking the highest proportion of lowball offers since the first Covid lockdown in 2020. This figure has risen from 48% in June and 45% in July of the previous year, highlighting a growing trend among investors to seek substantial discounts. Furthermore, cash-backed landlords were even more aggressive, with 63% of their offers falling at least 10% below the asking price.
What This Means for Sellers and Buyers
Sellers may need to adjust their expectations in light of these trends. With 27% of offers from investors at 10% or more below the asking price being accepted in July, compared to just 18% last year, it’s clear that negotiations are shifting. Flat owners appear more willing to accept discounted offers, with 41% of leasehold property sellers agreeing to lower prices. This trend suggests that sellers may need to be more flexible to secure a sale, especially for properties that have been on the market for extended periods.
For buyers, particularly first-time buyers and homemovers, the situation is more conservative. Only a quarter of offers from first-time buyers and 27% from homemovers were more than 10% below the asking price in July. This indicates that while investors are capitalising on the market’s softness, other buyer segments are less aggressive in their negotiations.
Regional Variations in Offer Acceptance Rates
The acceptance of lowball offers varies significantly across regions. In the South East, a striking 70% of offers from investors were at least 10% lower than the asking price, with 54% of these offers being accepted. The South West followed closely, with 60% of investor offers falling into this category and a 44% acceptance rate. In contrast, the North East saw only 32% of agreed deals comprising offers 10% or more below the asking price, while in London, lowball offers constituted just 16% of sales.
What Does This Mean for Rental Growth?
Despite the softening housing market, rental growth for new lets in Great Britain has risen by 1.9% year-on-year, with the average rent now exceeding £1,401 per month. This marks the fastest pace of rental growth for new lets in 19 months. Areas like Outer London have seen newly agreed lets surpass the £2,000 per month threshold, while the South East has crossed the £1,500 mark for the first time in July. However, the overall rate of annual rental growth for all rental homes has slightly decreased from 2.2% in June to 2.1% in July, indicating a complex rental market market.
Frequently asked questions
How are landlords affecting the housing market?
Landlords are increasingly making lower offers on properties, with many offers falling significantly below asking prices. This trend is reshaping negotiations and may pressure sellers to adjust their expectations.
What should sellers do in this market?
Sellers should be prepared for the possibility of accepting lower offers, especially if their properties have been on the market for an extended period. Flexibility in pricing may be necessary to secure a sale.