In the ever-evolving landscape of property investment, the Southern regions of England have witnessed a significant shift in buy-to-let purchases over recent years. According to a recent analysis by Paragon Bank, the proportion of buy-to-let properties acquired in Southern England plummeted to a record low in 2023, marking a continuation of a trend initiated by the introduction of the Stamp Duty surcharge for additional properties in 2016.
The analysis, based on industry data, revealed that only 35% of properties purchased with a buy-to-let mortgage in 2023 were located in the South East, Greater London, and the South West combined. This figure reflects a notable decline from 39% in 2022 and a striking drop from the peak of 52% in 2015, just before the implementation of the Stamp Duty surcharge. Since then, the proportion of buy-to-let properties acquired in Southern regions has seen a consistent yearly decrease, except for the years 2020 and 2021 when the Stamp Duty Holiday was introduced amidst the Covid-19 pandemic.
Breaking down the data further, the analysis revealed a substantial decrease in the proportion of mortgaged buy-to-let homes purchased in London, falling from 19% of the UK total in 2015 to just 12% in 2023. Similarly, the South East witnessed a decline from 24% to 17% over the same period, while the South West saw its share diminish from 9% to 6% of the total.
Conversely, the Northern regions experienced an upward trend in buy-to-let purchases, with the North West increasing from 9% in 2015 to 14% in 2023, and Yorkshire & Humber growing from 6% to 10% of mortgaged buy-to-let acquisitions.
Discussing the findings, Richard Rowntree, Managing Director of Mortgages at Paragon Bank, emphasized the impact of the Stamp Duty surcharge on markets with above-average house prices in the South of England. Rowntree highlighted that compared to 2015, the number of homes purchased with a buy-to-let mortgage was 70% lower in 2023, with more buy-to-let properties acquired in the North West than in London during three of the past five years.
Looking ahead, Rowntree emphasized the need for a robust private rented sector across the UK, particularly in light of population growth forecasts. With the population expected to increase by 9.9% by 2036, demand for rental property is projected to intensify, especially in Southern regions like London, where a transient population underscores the importance of a strong rental housing supply.
Rowntree concluded by stressing the importance of boosting supply to meet forecasted demand growth, warning that failure to do so could lead to further rent hikes in markets grappling with supply-demand imbalances.
As property investment trends continue to evolve, the data underscores the shifting dynamics of the buy-to-let market, with investors increasingly diversifying their portfolios beyond traditional Southern hotspots.