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, already making up 1 in 3 shareholders of new buy-to-let company formations.

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 (or, more to the point, due to negative economics)? Are these landlords actually being forced by financial circumstance, harmed by higher taxes, and flummoxed by regulatory overhaul – or might there be other, more benign, even happy reasons that they are choosing to vacate this 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 Petermans, we are beginning to see it happening first-hand, although not to the extent that Hamptons’ research suggests… 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 that it is all because of government policy – be it tax or legislation.

No doubt, changes to mortgage interest relief, more stringent EPC requirements forcing sometimes costly renovations, and not to mention various worries about changing capital gains tax have all contributed to a tougher climate. On top of that, the recently passed Renters Rights Act has given landlords pause for thought (and in some cases, ‘paws’ for thought… but that’s a blog for another day…).

However, many landlords leaving the market today are not “quitting” at all… they are simply completing.

These are investors who perhaps bought 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, they have created long-term financial security – and the job is done.

It is a pattern we have begun to notice here in Edgware. Long-standing landlords 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

Whilst some landlords are clearly stepping back, 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, or actively seeking education in the subject prior to embarking on their buy-to-let journey.
• Prioritise efficiency and sustainability, investing in better-rated homes and upgrades; it keeps them ahead of EPC changes, but importantly the reason behind it is that they tend to be driven by greener, more left-leaning attitudes towards housing provision, rather than cost-saving or compliance.
• 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, more attuned to what tenants want, and actively aiming to provide high quality, sustainable accommodation.

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, which in turn keeps upward pressure on rents.

One interesting development – and one that here in North London we should be mindful of – is that we are currently seeing a regional divide emerging when it comes to target areas for these Millennial and Gen Z investors.

Figures show that younger professional landlords often seek to purchase rental investments with higher rental yields in the Midlands and the North of England, where entry costs are lower and immediate returns that can be reinvested are greater.

We are feeling this in Edgware. We have noticed an increase in buy-to-let purchases by companies – or, portfolio landlords swapping from private ownership to ownership through a company formation – and when it comes to new purchases we have seen younger landlords making up these numbers (and remember, the oldest of the ‘millennial’ generation is now 44 years old!). Nevertheless, whilst notable, we are not yet seeing the number of buy-to-let purchases matching the number of buy-to-let sales – and that, undoubtedly, creates more competition amongst renters and inevitably pushes up rents.

Younger landlords may be stepping into the shoes of outgoing investors elsewhere, but this change in places like London and the Home Counties might be more gradual, purely due to the price of entry for younger investors.

It will however be interesting to see the shape of buy-to-let purchases as the Broadwalk development takes off. If Hamptons is correct, these modern, energy efficient homes would seem to very much match up to the criteria for buy-to-let properties that Millennial and Gen Z buyers are looking for.

What it all means for you

If you are an established landlord in Edgware, this generational shift can work in your favour.

• You are still at present operating in a supply-constrained market, which keeps rental demand strong. Younger buyers are entering the buy-to-let sector in greater numbers, but as yet they do not dominate it, and certainly not here in North London.
• You have already navigated rental challenges that newer entrants are only just discovering. They may be savvy and will learn quickly, 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 properties 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 always recommend you seek good, professional tax advice, and of course engage an experienced lettings and property management team, like ourselves at Petermans. This way, you can grow your buy-to-let business whilst ensuring that your property or portfolio is kept compliant.

We know the local market, the shape of it, the rent profiles of different local areas, and we have our finger on the pulse when it comes to new-build developments locally. If you wish to put together a master plan for buy-to-let investment here in Edgware, please do speak to one of our lettings experts.

Our take

The next generation of landlords is arriving on the scene more engaged, more educated, and more open to doing things properly; ‘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 are 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.

FAQs about the Next Generation of Landlords

Q: Why are so many landlords selling their rental properties?
A: There is definitely some pressure from changing legislation and rising costs, however many landlords are simply reaching the natural end of their investment cycle, and now selling to release capital after decades of growth.

Q: Who are the new landlords entering the market?
A: Millennials and Gen Z investors are increasingly purchasing through limited companies, focusing on sustainability and professional management. This is a trend being seen more in the North and the Midlands but one we expect to see creep into the London market over time.

Q: Is Edgware still a good place to invest in buy-to-let?
A: Yes. Edgware offers strong rental demand, good yields, and a growing market for both traditional and new landlords, with over 3,000 new build homes set to be built here in the next few years. It is located at the end of the Northern Line and close to Stanmore for the Jubilee Line, offering easy options for travel into central London and across it.