Recent research indicates that buy-to-let (BTL) landlords are increasingly taking advantage of a weakening housing market, making lower offers on properties. This trend is significant as it highlights changing dynamics in property transactions, particularly for sellers and investors.
How Are Landlords Shaping the Current Market?
According to data from Hamptons, BTL investors are becoming more prominent in the housing market, particularly as they can make chain-free purchases. In July, these investors represented 14.1% of all property transactions, an increase from the year-to-date average of 12.4%. This rise suggests that landlords are capitalising on opportunities to acquire properties at lower prices, reflecting a broader trend of price negotiations in the current market.
What Discounts Are Landlords Seeking?
Landlords are actively pursuing bargains, with the average BTL investor paying just 88.7% of the initial asking price in July. Notably, 56% of offers made by these investors were at least 10% lower than the seller’s original asking price. This marks the highest proportion of lowball offers since the first Covid lockdown in 2020 and is a significant increase from 48% in June and 45% in July of the previous year. Cash-backed landlords are even more aggressive, with 63% of their offers falling at least 10% below the asking price.
How Do Owner-Occupiers Compare?
In contrast to BTL investors, owner-occupiers appear more conservative in their approach. In July, only a quarter of first-time buyers and 27% of homemovers made offers that were more than 10% below the asking price. This cautious behaviour among owner-occupiers suggests a reluctance to engage in aggressive negotiations, likely due to concerns over market stability and future property values.
What This Means for Sellers and Investors
For sellers, particularly those with leasehold properties, the willingness to accept lower offers is evident, with 41% of flat owners agreeing to discounted prices. Properties that have been on the market for longer periods are also more likely to accept lower offers, with homes listed for 45 days typically accepting offers within 10% of the asking price. In the South East, a staggering 70% of offers were at least 10% lower than the asking price, indicating a significant shift in negotiation power towards buyers, especially investors.
For landlords, the current market conditions present an opportunity to expand their portfolios at reduced prices. However, they should remain vigilant about the long-term implications of these purchases, particularly in a fluctuating rental market. Rental growth for new lets in Great Britain rose by 1.9% year-on-year, with average rents now exceeding £1,401 per month, signalling potential for future income generation despite current market challenges.
Frequently Asked Questions
What should landlords consider when making low offers?
Landlords should assess the overall market conditions, the property’s time on the market, and the seller’s motivation. Making informed offers can help secure better deals while ensuring the investment remains viable in the long term.
How does the current rental growth impact landlords?
The recent increase in rental growth suggests that while property purchase prices may be declining, rental income potential remains strong. Landlords should monitor these trends to maximise their investment returns.