Latest House Price Index explores why the proportion of previously rented properties being listed for sale is starting to rise.

A number of landlords are exiting the private rental sector in response to changing market dynamics.

The proportion of homes for sale that were previously rented has been on a steady upward trajectory in all regions of England and Wales during the past year.

The trend has been most pronounced in London, where 13% of homes being marketed for sale in the last three months of 2020 were previously rented, while it is also strong in the south east.

Why is this happening?

On the one hand, landlords may simply be selling properties to crystallise gains following recent strong house price growth.

At the same time, some may have been prompted to sell up following speculation that capital gains tax rates were set to be increased in the Budget, although when the Chancellor delivered his statement he only announced that the threshold at which the tax kicks in would be frozen until April 2026.

Landlords’ decision could also be in response to changes to demand in the rental sector as a result of the pandemic, with renters favouring the suburbs and more rural locations.

Finally, buy-to-let investors have been hit by a raft of tax and regulatory changes in recent years, which may have acted as a catalyst for many to sell their less profitable properties.

Gráinne Gilmore, head of research, said: “One area of the market where there is more supply coming is among landlords who are bringing their investment properties forward for sale.

“The share of homes listed for sale which were previously rented has risen in nearly every region during 2020, as landlords reassess their portfolios in light of current rental trends, or ahead of possible tax changes for investment property.

“While the homes for sale account for a very small proportion (less than 1%) of rented stock, it is a noticeable trend emerging in the market.”

What’s the background?

The pandemic, with its associated lockdowns and shift to working from home, has driven a significant change in demand in the rental market.

There has been a fall in tenants looking for homes to rent in cities, leading to a slight softening in rents in these locations, with London particularly impacted.

By contrast, demand for homes to rent has risen in commuter zones and well-connected towns, pushing rents higher.

Tenants are also looking for more space, and while overall demand has risen by 21% during the past year, houses are letting 30% quicker than they were 12 months ago.

Top three takeaways

  • A number of landlords are exiting the private rental sector in response to changing market dynamics
  • The proportion of homes for sale that were previously rented has been on a steady upward trajectory in all regions of England and Wales during the past year
  • The trend has been most pronounced in London, where 13% of homes being marketed for sale in the past three months of 2020 were previously rented