Landlords are considering whether to sell up their portfolios as proposed changes to the government's energy performance certificate ratings loom.
By 2025 all newly rented properties will have to have a certification rating of C or above, with existing tenancies needing to comply by 2028.
The cost to landlords will total an average of £10,400 per property to get them up to standard, according to data published by Aldermore Bank.
For some in the buy-to-let business, these costs are proving too much to stay in the business.
The Royal Institution of Chartered Surveyors's latest residential market survey cited at least three surveyors who saw the adverse effects of incoming EPC rules on landlords.
Will Ravenhill, a surveyor at Readings Property Group, said: “Many of our more established landlords [are] now considering selling due to impending changes in EPC legislation.”
|Cost of bringing properties up to EPC standard||%|
|Less than £1,000||7%|
|Between £1,000 and £3,000||17%|
|Between £3,000 and £5,000||23%|
|Between £5,000 and £10,000||26%|
|£10,000 or more||27%|
William Nicol-Gent, a Richmond-based surveyor at Killochan & Co, said the private rental market was being “adversely affected” by higher EPC standards and the consequent uncertainty.
For those landlords who stay in the market, this will mean increased investment in their portfolios and - in many cases - higher rents for tenants.
“Rents continue to rise in line with increased investment required from landlords,” said Robert Bell, a Horncastle-based surveyor.
Of the 800 active landlords Aldermore Bank spoke to, 23 per cent said they would pay for EPC-driven renovations by putting up rent.
Seven in 10 (71 per cent) said they will dip into their savings to pay for the upgrades, a quarter (25 per cent) intend to do so through government funding, while a lesser 11 per cent will likely seek a further advance from their mortgage lender.
In the past year, landlords have also exited the market due to rising house prices presenting an opportunity to cash. Many have also moved to the short-term lettings market to capitalise on the uptick in domestic holidays.
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: “Vanishing landlords are piling on the pressure for renters. Agents reported that the number of prospective tenants continues to rise, while the number of landlords dwindles.”
She cited one agent in the latest RICS survey, which said they can add 15 per cent to current rents and easily find tenants.
“Given that rent already swallows a third of the income of renters, this could cause real hardship for those forced to hike rental payments,” Coles continued.
“And at a time when the price of energy, petrol and food is rising dramatically, higher rents are the last thing they [tenants] need.”