Landlord property purchases hit record low
Landlord property purchases hitting a record low rather than landlords selling-up is causing rental market supply issues, research suggests.
The latest Hamptons Lettings Index shows landlords purchased one in ten (10%) homes sold across Great Britain during the first half of this year – the lowest share since its records began in 2010.
The figure is considerably less than the 16% recorded in 2015 – before tax and regulatory changes were introduced, which 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, Hamptons said.
The share of investor purchases has been gradually falling over the course of the year, 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 Great Britain in 2024, 75,900 or 40% fewer than in 2015, the research warns.
Hamptons said landlord purchases have fallen in every region except the North-East since 2015, which is home to the highest rental yields.
Despite cost pressures and wider uncertainty about future rental reform, there is no sign that more landlords are selling up, Hamptons said.
Its research showed the share of homes sold by a landlord has actually been falling for the past three years. Private landlords accounted for 13% of all sellers in Great Britain so far this year, down from 14% in 2023 and 16% in 2022.
Even so, landlords are still selling more properties than they’re buying, which is reducing the number of homes available to rent. This trend has held in each year since 2016, when the 3% stamp duty surcharge on second home purchases was introduced and it was announced that some landlords could no longer fully offset their mortgage payments against their tax bills.
Based on current trends, Hamptons estimates that a further 146,060 homes will be sold by private landlords across Great Britain this year. This will more than offset the 113,630 new buy-to-let purchases in 2024 and will likely mean that private landlords will have sold 328,750 more rental homes than they’ve bought since 2016.
While institutional investment into larger rental developments, primarily through Build-to-Rent, has filled some of this void, there are still fewer homes available to rent than before. There were 42% fewer rental homes on the market across Great Britain last month than in June 2016.
Aneisha Beveridge, head of research at Hamptons, said:
“Rather than a mass landlord sell-off, the lack of homes available to rent has been caused by fewer investors entering the market.
“Tax and regulatory changes introduced since 2016 have been the main culprit, but these disincentives to invest have been compounded more recently by higher interest rates and political uncertainty around the threat of more rental reform.
“The lack of supply is one of the main factors underpinning strong rental growth and this is unlikely to reverse any time soon.
“The challenge for the new Government, which is keen to boost homeownership, is to increase security and the quality of homes for tenants living in the rental sector without disincentivising or pushing out more landlords.
“While some of the homes that previously would have been bought by an investor have found their way into the hands of a first-time buyer, high mortgage rates and rising rents are likely to lock out many would-be homeowners over the next few years, keeping them in the rental sector for longer.”
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