Landlords purchased just 10% of homes sold across Britain during the first half of this year – the lowest share for at least 15 years.
The figure comes from Hamptons which says the new low is a sharp contrast with the 16% recorded in 2015 – before tax and regulatory changes reduced the appeal of investment in buy to let.
More recently, high mortgage rates combined with political uncertainty and the threat of new rental regulations have weighed on the appetite for new investors to enter the market. The share of investor purchases has been gradually falling further over the course of 2024 so far, reaching a low of 9.7% in June.
Assuming current trends continue into the second half of the year, in number terms, there are likely to be 113,630 new buy to let purchases across Britain in 2024, 75,900 or 40% fewer than in 2015.
Scotland – where there are rent controls has the lowest level of investor purchases. Buy to let investors bought just 5% of homes sold in Scotland so far this year, down from 10% in 2015 and 7% in 2019.
High mortgage rates mean that new buy to let investors are increasingly focusing on the highest-yielding areas to make the sums stack up.
Six of the 10 local authorities with the highest share of buy to let purchases are in one of the three Northern regions.
Sunderland tops the list, where 45% of homes were bought by an investor during the first half of the year. Swindon, Enfield and Torbay are the only Southern local authorities to make the top 10 list.
The lack of new investment comes despite yields rising to record highs across the country, claims Hamptons.
Strong rental growth combined with stagnant property prices meant that the average investor purchasing a new buy-to-let in England and Wales this year achieved a gross yield (before costs and taxes) of 7.3%, a whole percentage point more than in 2015, and up from 7.0% in 2023.
In cash terms, this means a typical investor would earn an extra £1,906 a year in rent on a £200,000 purchase than if they had bought in 2015 at a yield of 6.3%.
However, higher mortgage rates and the inability to fully offset these payments (unless owning in a limited company) have reduced post-tax buy to let profits for most higher-rate taxpaying landlords.
Hamptons estimates some 16% of new investors achieved a gross yield in excess of 10% this year, up from 14% in 2023 and more than double the share who achieved double-digit returns back in 2016 (7%)
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