Landlords have flocked to auction houses in search of a quick sale after tax changes and rising interest rates killed off their profits.
But investors have struggled to find buyers in recent months after appetite for rental properties dropped off, amid an exodus of smaller landlords from the buy-to-let market.
A series of punishing tax changes in recent years has been compounded by soaring interest rates, impending tenant arrears and the threat of costly energy efficiency upgrades mandated by law coming down the track.
The toxic cocktail of higher costs and unreliable income has made it harder for landlords to make a profit on their investment, with many heading to auction in search of a quick exit from the market.
Nathan Emerson, of trade body Propertymark, said there had been a “noticeable increase” in the number of landlords selling at auction. He said: “It is no surprise because incentives for landlords in the private rented sector are diminishing.
“Taxation is getting worse and increasing pressure is being placed on the wider economy, making many investments completely unaffordable.”
Landlords are forecast to lose thousands in rent this financial year as the cost of living crisis pushes the number of households falling into arrears to its highest level in more than a decade.
Stuart Collar-Brown, of auction site My Auction, said: “The benefits of having a rental property have disappeared for many smaller investors, especially accidental landlords.
“Landlords who only have one property with a two- or five-year fixed rate ending in the next few months will be in for a big mortgage shock. For many it won’t be financially worth it anymore.”
Speed and certainty are two of the biggest advantages which attract sellers to auctions, rather than advertising on the open market using an estate agent.
Buyers pay a sizeable deposit once their bid is successful and contracts are prepared prior to the auction date, meaning the risk of a sale falling through is minimal.
Mr Collar-Brown said: “A landlord can sell within four to five weeks of first approaching the auction house, it’s a very quick process and gives them a certainty they can’t find elsewhere.”
But selling properties at auction means targeting mainly other landlords, of whom there are fewer, and cutting out potential owner-occupier buyers.
Mr Collar-Brown added: “The pool of investors looking to buy rental properties both inside and outside the auction house has shrunk. It is now mainly professional portfolio landlords who will snap up these homes, because they have bigger cash reserves immune to interest rate rises.”
The success rate of residential investment properties listed at auction has fallen in the UK over the past year. In the most recent quarter roughly 66pc of rental properties listed under the hammer successfully sold, compared with 75pc in the same period last year, according to analysis of the auction industry by the Essential Information Group.