In 2023, the proportion of buy-to-let properties purchased in Southern England hit a record low, marking a significant shift in investment patterns. This trend, which has been on a downward trajectory since the introduction of the Stamp Duty surcharge for additional properties in 2016, reflects a broader transformation in the real estate market landscape.

According to Paragon Bank’s analysis of industry data, only 35% of properties acquired with a buy-to-let mortgage in the past year were located in the South East, Greater London, and the South West. This marks a notable decrease from the 52% reported in 2015.

Richard Rowntree, managing director of mortgages at Paragon Bank, shed light on the implications of this shift. He highlighted how the Stamp Duty surcharge had a disproportionate impact on markets with higher-than-average house prices in the southern region of England. For instance, compared to 2015, the number of homes purchased with a buy-to-let mortgage dropped by 70% last year. Notably, a greater number of buy-to-let properties were purchased in the North West than in London during three of the past five years.

This change in investment patterns is evident in the data, with regions like the North West and Yorkshire & Humber witnessing a significant increase in the proportion of buy-to-let purchases since 2015. Conversely, areas traditionally favoured for such investments, including Greater London, the South East, and the South West, have experienced substantial declines.

Rowntree emphasized the long-term implications of these trends, stressing the importance of addressing the growing demand for rental properties across the UK. With the population forecasted to increase by 9.9% – equating to 6.6 million people – by 2036, the demand for rental accommodation is expected to surge. This is especially true for areas in the South, particularly London, where a transient population underscores the need for a robust supply of rental homes.

He underscored the necessity for a diverse range of fairly priced, high-quality rental properties to meet the evolving needs of renters. Without an increase in supply to match forecasted demand growth, rental prices are likely to escalate in markets characterized by significant supply-demand imbalances.

In conclusion, the changing landscape of buy-to-let investments in Southern England reflects broader shifts in the real estate market, driven in part by regulatory changes and evolving demographic trends. As demand for rental accommodation continues to rise, stakeholders must adapt to ensure the availability of affordable, quality housing options for renters across the UK.