For the last several months – even years – the story of the buy-to-let market in the UK has been painted as one of decline, with landlords exiting in their droves due to squeezed margins, changing regulation, and ever-rising taxes.
But if we dig into things a little deeper, another narrative emerges. One not of decline, but of change and renewal – a passing of the baton.
According to recent research from Hamptons, Millennials now account for around half of all new buy-to-let company formations, with Gen Z investors beginning to follow suit.
It coincides with a moment in which significant numbers of long-term landlords, many of whom began investing in the early 2000s, are choosing to sell up. But are there reasons for this group doing so really economic ones? Are these landlords actually being forced by financial circumstance, harmed by higher taxes, and flummoxed by regulatory overhaul – or might there be other reasons that they are choosing to vacate the space now?
These same issues affect younger landlords too, after all – and yet, according to Hamptons’ research, they are wilfully entering that same arena.
Here at LEA Property Solutions, we are seeing it happening first-hand… so what is the story?
Let’s scratch under the surface and see if we can find out.
The end of an investment era
The headlines we tend to read tell a simple story: that landlords are throwing in the towel and it is all because of government policy – whether that’s tax or legislation.
No doubt, changes to mortgage interest relief, more stringent EPC requirements forcing sometimes costly renovations, and various worries about changing capital gains tax have all contributed to a tougher climate.
But in reality, many landlords leaving the market today are not “quitting” at all… they are completing.
These are investors who bought perhaps twenty or even thirty years ago, often through SIPPs (Self-Invested Personal Pensions), and who are now reaching the natural end of that investment life cycle. Their properties have served their purpose, providing rental income, growing in capital value, and funding retirements; in short, creating long-term financial security.
It is a pattern we have noticed here in Ipswich. Long-standing clients are beginning to wind down their portfolios, but often it is not out of frustration. Rather, it is because their pensions are maturing, or they are simply feeling ready to release capital after two or three decades of – in many cases – quite staggering capital growth. It is a normal evolution, rather than a forced, distressed exodus.
A new kind of landlord steps in
Some landlords are clearly stepping back – but others are stepping forward, as identified in Hamptons’ recent study.
Millennials and Gen Z investors are increasingly entering the market with a fresh mindset and, in many ways, with quite different tools at their disposal.
As a profile of buyer, these are more likely to:
- Purchase through limited companies, having grown up aware of the tax advantages and liability benefits.
- Prioritise efficiency and sustainability, investing in better-rated homes and upgrades that keep them ahead of EPC changes.
- Treat property as a long-term, data-driven investment, balancing yield, capital appreciation, and tenant experience – often tracking such things with AI-assisted applications.
It is an evolution that brings a specific type of professionalisation to the sector. Even smaller landlords now, especially amongst this group, are behaving more like portfolio investors, being sharper on compliance, keener on presentation and often more attuned to what tenants want.
How the market itself is changing
Younger landlords may be replacing older landlords, but the 50% figure that Hamptons has reported refers to new buy-to-let company formations – so is not a representation of 50% of all buy-to-let purchases. This is interesting, and in part reflects a younger attitude towards the process.
Nevertheless, in the meantime, it still means that at present fewer rental properties are coming to market, as first-time buyers are often purchasing these ex-rentals being sold by landlords, as their first home – thus taking rental stock out of circulation. Demand therefore is still outstripping supply, and in turn that means continued upward pressure on rental values, something that tenants can feel acutely across the South East in particular.
For renters in the South and East of England, the issue is not helped by a regional divide emerging when it comes to target areas for these Millennial and Gen Z investors. Younger landlords often seek to purchase rental investments with higher rental yields in the Midlands and the North of England, where entry costs are lower – so again this creates something of a disconnect.
That said, Ipswich, and indeed Suffolk in general, offers much more affordable purchases for savvy buy-to-let investors than, say, Essex, just a few miles to the south of us – so for that reason, we are beginning to also see more of these types of buyer, and this trend is likely to continue. The change in places like Essex, London and the Home Counties might be more gradual, purely due to the price of entry for younger investors.
What it all means for you
If you are an established landlord in Ipswich, this generational shift can work in your favour.
- You are operating in a supply-constrained market, which keeps rental demand strong. Younger buyers are entering the buy-to-let sector, but their focus – as mentioned – is often on higher yielding rentals in the North of England and the Midlands.
- You have already navigated rental challenges that newer entrants are only just discovering. They are savvy, but you have the experience – and perhaps the staying power that younger landlords may not have. That said, the fact they are more often purchasing through the vehicle of a limited company may indicate an intent to stick it out long term.
- You are well-placed to benefit from the ongoing professionalisation of the sector. Don’t shy away from it – embrace it. You can learn a lot from the way younger generations of investors approach the market.
Even as the profile of landlords begins to change, the expectations of tenants and regulators are also evolving. Just like landlords, the profile of tenants is becoming younger too. Digital communication, faster response times, energy efficiency… all these are becoming a basic expectation. Landlords who adapt will thrive.
Now – if you are part of this new cohort of younger landlords – these so-called ‘Millennial’ or ‘Gen Z’ investors – either with a property (or more) under your belt already, or simply the ambition burning away right now to become a landlord – there’s never been a better moment to do it the right way. This might well mean looking at a limited company structure, given the way that regulation is changing – but we would implore you to seek good, professional tax advice, and not least an experienced property management team, like ourselves at LEA Property Solutions, that can ensure your property or portfolio is kept compliant.
Our take
The next generation of landlords is arriving on the scene more engaged, more educated, and more open to doing things properly – and I say ‘properly’ in terms of the desire to immediately comply fully with regulations and focus on provision of top quality, modern, energy efficient and often greener accommodation for tenants. That can only be good for the market.
Whether you’re winding down a portfolio, in the process of building one, or looking for your first investment, the core ingredients that make success a sure thing haven’t particularly changed: a well-maintained property that attracts respectful tenants, and a lettings and property management team that is on your side; an agency that treats you, your property and your tenants with care.
That’s the foundation we’ve built our business on here at LEA Property Solutions, and it’s what every generation of landlord will continue to need.