Buy-to-let investment levels are lower than at any time since before the financial crisis thanks to the impact of higher taxes.
Landlords purchased 10 per cent of all the homes sold in Britain in the first four months of this year, the lowest proportion since 2007 and a significant dip since the high of 16 per cent in 2015, an analysis by the estate agency Hamptons showed.
The data showed that those still investing had pivoted in record numbers to the north of the country where property prices were cheaper, mortgages lower and yields higher, and were moving away from London. A record 39 per cent of purchases this year were either in the Midlands or the north of England, up from 24 per cent in 2007. Investors only bought 8 per cent of homes sold in London.
London-based landlords are also turning away from the capital, heightening fears of a supply crisis for renters. Sixty-five per cent of London-based investors bought a property outside the capital in purchases made so far this year, up from 41 per cent a decade ago and 24 per cent in 2007.
Landlords have complained about a succession of tax rises in recent years, which they say have reduced their appetite to buy property and forced those who are purchasing homes to do so in cheaper areas. In 2016, George Osborne, who was then the chancellor, raised stamp duty by three percentage points for second home buyers and eroded the tax relief that landlords could claim on mortgage interest.
Meanwhile, landlords have also endured a sharp rise in mortgage rates since autumn 2022, making investing in the southeast even more prohibitive, and some have been incensed by Labour’s strengthening of renters’ rights. In her autumn budget, Rachel Reeves, the chancellor, took investors by surprise by raising stamp duty by another two percentage points.
The Hamptons data showed that the proportion of buy-to-let landlords as a proportion of all purchases had declined in every region of Britain since 2015 except the northeast, where landlords bought 28 per cent of homes sold this year and which had the highest gross yield of any in the country — 9.3 per cent compared with the national average of 7.1 per cent. The yield in London was 5.7 per cent.
“Buy-to-let investment is gradually grinding to a halt in some markets where higher purchase and mortgage costs take their toll,” Aneisha Beveridge, the head of research at Hamptons, said.
She added that by 2033, when the bulk of buy-to-let purchases are expected to be in the Midlands and the north of the country, the Treasury would lose £161 million a year in stamp duty it would have gleaned from pricier property purchases.
“This may also have a knock-on impact on rents if supply conditions in the south of England worsen, and where tenants’ finances are already most stretched,” she added.
The local authorities with the largest proportion of landlord purchases so far this year have overwhelmingly been in the northeast and the Midlands, with 50 per cent of properties bought by investors in Redcar and Cleveland, 40 per cent in Darlington and 39 per cent in Derby.
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