Landlords finally purchasing more homes than they sell

Buy-to-let landlords are buying more homes than they’re selling for the first time since Q1 2016, the year the government introduced the 3% stamp duty surcharge on second homes.

Investors purchased 13.9% of homes sold across Great Britain in Q1 2022, the highest proportion since Q1 2016 (15.9%), Hamptons research shows.

The North East saw the biggest year-on-year increase in buy-to-let purchases as investors sought higher-yielding properties, as landlords bought 28% of homes sold in the region.

London investors are buying outside the capital, as a record 73% bought buy-to-lets outside the capital in 2022, up from just 24% a decade ago.

Aneisha Beveridge, head of research at Hamptons, said: “Tax and regulatory changes have weighed heavily on the buy-to-let sector over the last five years causing more landlords to sell up at a time when fewer new entrants were looking to buy.

“As a result, there are around 300k fewer privately rented homes in Great Britain today than at the peak of the sector in 2017.

“While we expect investors to continue purchasing at around the same rate over the course of 2022, it’s unlikely to be enough to make up for the full loss of rental homes during the last five years.

“A lack of rental homes is one of the reasons why rents have been rising at such pace over the last year.

“March set a new record for rental growth as rents bounced back from 2021 lockdown lows last March.

“But as these new buy-to-let purchases begin to feed into the lettings market over the coming months, we expect to see rental growth cool, particularly as the cost of living crisis weighs on affordability too.”

North East is buy-to-let capital

The North East is the buy-to-let capital of Great Britain, where investors purchased 27.7% of homes sold in the first three months of this year, more than twice the share bought by first-time buyers (12%).

It’s also the region that saw the biggest year-on-year rise in buy-to-let purchases.

The region offers the highest gross yields in the country, averaging 9.0% compared to 6.5% across England & Wales (table 1).

Table 1 – % of homes bought by investors

  Q1 2021 Q1 2022 YoY Change Average gross yield
North East 20.2% 27.7% 7.5% 9.0%
East Midlands 14.7% 20.2% 5.5% 7.2%
East 7.1% 11.4% 4.3% 6.3%
Wales 9.2% 12.7% 3.5% 7.9%
South East 9.4% 12.1% 2.7% 6.0%
Yorkshire & The Humber 15.3% 17.8% 2.5% 7.7%
South West 14.0% 16.1% 2.1% 6.7%
London 7.9% 9.5% 1.7% 5.0%
West Midlands 16.1% 16.8% 0.8% 6.8%
North West 14.7% 14.4% -0.3% 7.6%
Scotland 10.0% 7.9% -2.1%
Great Britain 11.9% 13.9% 2.0% 6.5%

Source: Land Registry & Hamptons

Middlesbrough topped the local authority list of buy-to-let hotspots – 58% of homes sold in the area over the last six months were purchased by an investor.

With an average gross yield of 8.9%, it’s the 13th highest yielding local authority in England and Wales.

While Northern areas dominate the buy-to-let purchase list, six Southern areas made it into the top 15, including London’s most affordable borough, Barking and Dagenham.

Table 2 – Top 15 areas with the highest % of properties bought by a landlord (last 6 months)

  Local Authority Region % properties bought by a landlord Average gross yield
1. Middlesbrough North East 58% 8.9%
2. Calderdale Yorkshire & The Humber 50% 7.7%
3. East Staffordshire West Midlands 48% 6.5%
4. Peterborough East 43% 6.0%
5. Boston East Midlands 39% 8.0%
6. Swindon South West 36% 6.1%
7. Liverpool North West 34% 7.3%
8. Nottingham East Midlands 34% 7.6%
9. York Yorkshire & The Humber 31% 5.8%
10. Plymouth South West 29% 6.1%
11. Exeter South West 29% 5.9%
12. Barking & Dagenham London 28% 5.4%
13. Derby East Midlands 28% 6.7%
14. Leicester East Midlands 28% 6.1%
15. Portsmouth South East 26% 5.9%

Source: Hamptons

However, a lack of stock available to buy has meant that investors are increasingly having to pay over the asking price.

Competition from other buyers has meant that so far this year 40% of investors have had to pay over the asking price for their new buy-to-let.

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