Landlords acquired a mere 10% of homes sold across Britain in the first half of this year, marking the lowest share in at least 15 years, according to a recent report by Hamptons. This sharp decline contrasts with the 16% share recorded in 2015, before a series of tax and regulatory changes began to diminish the attractiveness of buy-to-let investments.
The downturn in landlord purchases has been exacerbated by high mortgage rates, political uncertainty, and looming rental regulations, further discouraging new investors from entering the market. In 2024, the share of investor purchases continued to slide, hitting a low of 9.7% in June.
If current trends persist into the latter half of the year, projections suggest there will be around 113,630 new buy-to-let purchases across Britain in 2024. This figure represents a significant decrease of 75,900, or 40%, compared to 2015.
Scotland has experienced the most significant drop, with rent controls contributing to the lowest level of investor purchases. Landlords bought only 5% of homes sold in Scotland so far this year, down from 10% in 2015 and 7% in 2019.
In response to high mortgage rates, new buy-to-let investors are increasingly targeting high-yield areas to ensure profitability. Six of the ten local authorities with the highest share of buy-to-let purchases are located in one of the three Northern regions. Sunderland leads the list, with 45% of homes bought by investors during the first half of the year. The only Southern authorities in the top ten are Swindon, Enfield, and Torbay.
Despite the decrease in new investments, Hamptons reports that yields have reached record highs across the country. Strong rental growth combined with stagnant property prices have allowed the average investor purchasing a new buy-to-let in England and Wales this year to achieve a gross yield of 7.3%, up from 7.0% in 2023 and significantly higher than the 6.3% yield in 2015.
In practical terms, this means a typical investor would earn an additional £1,906 annually in rent on a £200,000 property compared to 2015. However, higher mortgage rates and the inability to fully offset these payments, unless owning through a limited company, have reduced post-tax profits for most higher-rate taxpaying landlords.
Hamptons estimates that around 16% of new investors achieved a gross yield exceeding 10% this year, up from 14% in 2023 and more than double the 7% who achieved double-digit returns in 2016.