According to Hamptons’ Monthly Lettings Index, 10.7% of sales agreed in November went to landlords, little change from the 10.2% average seen during the year.
Although this is down on the peak recorded in 2015, when landlords made up 15.7% of purchases, the level of sales agreed by landlords was around the same as recent years.
In comparison, landlords accounted for 10.8% of buyers in 2019 and 10.9% in 2020.
Hamptons said many of these sales would have been agreed before the government announced the increase to the surcharge, showing that landlords decided to go ahead with purchases rather than pull out.
Some 28% of sales by buy-to-let (BTL) investors in the three months before the tax change were either renegotiated or re-marketed, around half the level in the aftermath of the 2022 mini Budget.
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Landlords going North
While the increased stamp duty surcharge did not dampen investment, Hamptons said it encouraged investors to move away from the South of England and make purchases in the North.
The share of homes purchased by a landlord in the South West declined 10.5% compared to November 2015, accounting for 9.7% of sales.
This was followed by the West Midlands, where landlord purchases made up 13.1% of homes bought. This was 9% lower than the year before.
In London, there was a 6.2% drop to 14.7% of sales being made by an investor, while in the South East, this fell by 6.1% to a 10.2% share.
By contrast, 18.2% of homes bought in the North East were by a landlord, 0.2% higher than the year before. This region had the highest share of sales to landlords, attracting an average yield of 9.7%, the most favourable return on investment.
Aneisha Beveridge, head of research at Hamptons, said: “Early signs suggest that new landlords have shown relative resilience to yet another cost increase. While the number of buy-to-let purchases by landlords remains muted by historic[al] levels, their numbers have not collapsed. However, purchases are confined to the Midlands and Northern England, which are becoming buy-to-let heartlands where the surcharge bites slightly less hard.
“While no landlord will welcome a tax rise, falling interest rates next year will likely push buy-to-let returns to near the top of investment league tables. With savings rates heading closer to 3%, gross yields in Northern England of above 8% will increasingly attract money that would previously have gone elsewhere. While political headwinds haven’t gone away, these risks and added costs are increasingly being priced into buy-to-let returns in the form of higher yields.”
Rate of rental growth slows
The rate of rental growth fell to its slowest in four years in November.
Hamptons’ data showed the average rents on newly let properties increased by 2.6% annually, the lowest recorded since November 2020, when this was 2.4%.
However, since November 2020 and this year, rents have risen by 31.6%, outpacing average earnings.
Rents rose the fastest in Scotland and the North of England, at 7.2% and 5.7% respectively.
In London, there was just a 0.4% increase, the slowest growth across Great Britain. Meanwhile, growth of 2.9% was recorded in the South East and the South West separately.
The number of homes available to rent has stayed higher than last year’s levels, which has resulted in slower rental growth.
Hamptons said there are currently 13% more homes to rent than in November last year, when stock levels were near their lowest.
Beveridge added: “After an unprecedented four-year boom, rental growth for newly let properties has slowed to a crawl. The current level of growth is similar to pre-Covid times, when rents typically rose between 2% and 3% a year. However, the forces that pushed up rents haven’t entirely gone away.
“Tenants renewing contracts continue to see increases well above these levels, but the pace of these increases will slow as their rents climb closer to market rates.”
