How is the Cost-of-Living Crisis affecting Landlords?

Estimated reading time 6 minutes

The cost-of-living crisis refers to a period of time when the costs of everyday goods and essentials are rising quicker than the average household income. It has had several crucial impacts on landlords throughout the UK, some examples being rising interest rates, increased operation costs, market uncertainty and rental yields. The current fluctuating state of the UK economy has had varying influences on the housing market and therefore the way in which landlords operate and manage their property portfolio. All of these factors are intertwined and have consequences on one another, making the effect on landlords more complex and significant and can result in the need to sell a buy to let propery.

Why is there a cost-of-living crisis?

The cost-of-living crisis has become a major issue in the UK due to the combination of constant external shocks which have had an effect on the economy. The Russia-Ukraine war led to major oil supply shocks, introducing severe cost-push inflation and a lack of essential resources needed for an economy to grow. Brexit also brought issues such as labour shortages and trade barriers into the mix, creating high-cost pressures and rising prices, which have been the main causes of the inflationary pressures that the UK has been experiencing over the last couple of years. Inflation has an impact on a national level, meaning the entire country is facing higher costs and prices, eroding peoples’ real income and the real value of their wealth.

Rising interest rates

Inflation (a sustained rise in the national price level) has been an ongoing issue in the UK for the last few years. Inflation hit its peak in October 2022 at 11.1% and as of September 2023 stands at 6.5%. There is a direct link between a rise in the price level and a rise in interest rates, which acts as a constraint on landlords. If a landlord has a mortgage on their property, rising interest rates would increase their monthly repayments which they cannot always be passed on in full. Check out our guide “How much can a landlord increase rent?” for more details. This, therefore means lower profits or an increase in their total costs. At the same time, rising interest rates, which have been actively rising from 0.1% in December 2021 to 5.25% in August 2023, make taking mortgages out more expensive for potential buyers, leading to a decline in the number of people looking to buy and therefore less business for landlords.

Landlords increasing costs

As the cost-of-living crisis continues, landlords may face challenges in maintaining their profit margins. In periods of inflation, the value of money decreases, which can affect the relative value of property investments. This can put landlords in a challenging position, where they must consider either accepting a decrease in their profits or raising rent for their tenants. If they choose to raise rent, they face the possibility of losing tenants, especially since real estate is such a competitive market in the UK. However, if they don’t raise rents they will see their real incomes plummet, putting landlords in an uncomfortable decision-making position where they may be thinking I need to sell my property portfolio.

Landlords may also face higher costs for property maintenance, repairs and insurance, which affects their ability to maintain and improve their properties. Rising costs of labour, materials, utilities and property taxes all create a higher cost burden on landlords. Between January and March 2023, landlord repossessions increased by 69%, suggesting that more and more landlords are falling behind with their payments, likely due to rising costs from the crisis and government legislation on things like the renters reform bill, EPC rating requirements. The confluence of these factors leads to a formidable challenge in sustaining profitability amidst the cost-of-living crisis.

Value of my property

Economic fluctuations and instability have an effect on property prices and rental demand. This has an impact on a landlord’s ability to buy, sell or rent out properties profitably. If buyers are not confident in the UK’s economy, which has been the recent trend, it will deter them from taking out mortgages and making large purchases like buying properties. Potential buyers may delay purchasing decisions or choose to hold off investing in real estate until market stability is re-established. This therefore reduces demand for housing, creating downward pressure on property prices.

Uncertainty has a major impact on property values, which is very important for landlords who may be considering selling their properties or using them as collateral for financing. Market volatility makes it significantly more difficult to assess the true values of properties. This leads to discrepancies between perceived and actual property values, affecting listing prices and damaging business. Making many landlords ask is buy to let still worth it for landlords and investors?.

What about rental income?

The cost-of-living crisis rent is another major issue when it comes to landlords’ profits. When tenants struggle with increased living costs, they are less financially able to afford higher rents, having a direct impact on the incomes of landlords. Private rental prices in the UK rose by 5.0% in the 12 months to May 2023, up from 4.8% in the 12 months to April 2023. This increase would add to the higher costs that the tenants are already facing, acting as a deterrent for them to continue paying the high rent. Linking to higher operation costs, landlords are again faced with a dilemma where they are seeking to uphold profitability while also having to keep in mind the financial constraints of their tenants.  If a tenant falls into arrears a landlord must follow the legal guidelines linked tenancy, but gaining vacant possession can take time and therefore cost the landlord money. If you want to sell flat with tenant in situ, Gaffsy will buy any we by any house regardless of the tenancy status. Contact us for a free valuation today

Can I sell my property portfolio fast?

The cost-of-living crisis is an ongoing issue in the UK and is likely to carry on for a while and therefore a number of landlords are thinking about property portfolio exit strategies. Landlords selling through traditional agents will typically have to sell properties separately when wanting to decrease the size of their portfolios or leave the property business. It can be time-consuming and frustrating.

Gaffsy are happy to provide a cash offer for your entire portfolio, or the selection of properties you’d like to sell, there is no waiting around for multiple offers and numerous negotiations, you can sell a property portfolio to us as one transaction. 

If you are a landlord thinking now is the time to sell flat fast or sell your portfolio contact Gaffsy today a trusted cash house buyer. We will provide you with no obligation, quick cash offer and guaranteed property sale.  Our expert team of valuers can make an offer for your property within 60mins.  Our experienced team are on hand to assist you with the process and make everything flow smoothly if you want to get started today and would rather speak to us on the phone call us on 0207 459 4546.

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