Landlords bought more homes than they sold in the first three months of 2022, in a suggestion that the buy-to-let market is bouncing back.
Property investors purchased almost 14 per cent of all homes sold in Britain between January and March this year, an increase of two percentage points on 2021 and the highest recorded in that period since 2016.
In January to March 2016, landlords were rushing to buy properties ahead of a new 3 per cent stamp duty surcharge on second homes being implemented.
Property purchases: Landlords were responsible for almost 14% of all homes bought in the UK in the first three months of 2022, which could mean greater choice and lower rents for tenants
That tax still exists and has been cited as one of the factors that has led some landlords to leave the market or sell some of their properties in recent years.
Others have been put off by changes in the tax rules on mortgage interest, and upcoming rules on energy performance which could mean costly upgrades.
However, Hamptons’ data suggests that many landlords still view buy-to-let as a good investment.
Investors bought 42,980 homes across Britain during the first three months of this year, equating to £8.5billion worth of property.
This was nearly twice the £4.6billion recorded pre-Covid in the first quarter of 2019.
Rise in rentals: The net supply of properties to rent went up by nearly 13,500 in the first three months of 2022, following six years of falls
Landlords also sold fewer properties than in recent years, meaning that the very limited supply of homes to rent in some areas of the UK – which has pushed up rents – could begin to improve.
The share of homes sold by investors fell from 14 per cent in January to March 2021, to 10 per cent in January to March 2022 – the lowest proportion in 10 years.
This meant that there was a net gain of 13,480 rental homes at the start of 2022, compared to a 7,640 net loss in the same three months in 2021.
The number of rented homes peaked at 5.3million in 2017, but had fallen to 5million by 2021.
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. ‘
Which towns and cities are landlords buying in?
Hamptons has dubbed the North East the ‘buy-to-let capital of Britain’.
Landlords were responsible for almost 28 per cent of home purchases in the region in the first three months of 2022, up 7.5 percentage points compared to the previous year.
The North East has the highest rental yield of any UK area at 9 per cent, and Hamptons said landlords were looking to higher-yielding areas to ‘maximise their returns and hedge against inflation’.
Northern star: The North East proved extremely popular with buy-to-let investors, thanks in part to its high average rental yield of 9%
Other high-yielding regions include Wales with an average of 7.9 per cent, and Yorkshire with an average of 7.7 per cent.
Hamptons said landlords were less keen on buying in lower-yielding London, and that this included those that lived in the city themselves.
Nearly three quarters (73 per cent) of London-based landlords bought their buy-to-lets outside the capital this year, up from just 24 per cent a decade ago.
A lack of available stock for landlords to buy has meant that they are increasingly paying more than the asking price for properties, despite a reputation for being tough negotiators.
For the first time since Hamptons’ records began, the average investor is paying over 100 per cent of the asking price for a buy-to-let in England & Wales.
Going up: Rents increased across all regions of the UK, with the average hike being 9.1%
Typical rent up 9% in a year
Last month, the average cost of a new let in Great Britain rose to £1,115 per month, up 9.1 per cent from its 2021 low of £1,022 per month in March last year.
Rents in Inner London spiked by 21 per cent in the past year, after the city was badly hit by renters leaving during the Covid pandemic.
Outside London, the South West recorded the strongest rental growth, at 14.9 per cent.
Beveridge added: ‘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.’