Comparing the first quarter of 2021, to the same period in 2022 reveals that there has been a significant increase in properties being bought for investments. Across Great Britain, homes being bought by landlords rose from 12%, to 13.9%.
This year’s figure of 13.9% is the highest recorded in the first quarter of any year since 2016 which was a result of investors rushing to beat the 3% stamp duty surcharge on second homes.
During the first three months of the year, in total 42,980 homes were bought by investors, equating to £8.5bn worth of property. This is nearly double the figure recorded back in Q1 2019.
For the first time since 2016, investors bought more properties than they sold.
Home being sold by investors fell from 14% in 2021, to 10% in 2022, which was the lowest proportion in 10 years.
In order to maximise their returns, investors are increasing searching for the highest yielding areas of the country. So far this year, 71% of investors bought in the 50% highest yielding areas of the country.
It would also explain why 73% of London-based landlords bought their properties outside of the capital, where yields tend to be higher.
The buy-to-let capital of Great Britain just happens to be the North East where investors purchased 27.7% of homes sold in the first three months of this year. This is more than twice bought by first-time buyers which was 12%.
This region also saw the biggest year-on-year rise in buy-to-let properties. The area offers the highest gross yields in the country, averaging 9.0% compared to 6.5% across England and Wales.
In relation to the local authority list of buy-to-let hotspots, Middlesbrough takes the top spot with investors purchasing 58% of total homes sold over the last six months within the area. This area is the13th highest yielding local authority in England and Wales, with an average gross yield of 8.9%.
On the other hand, landlords are still facing challenges when it comes to lack of stock available to buy. Despite landlords being known to negotiate hard, other competition has results in many landlords having to pay over the asking price for their new buy-to-let. Figure show that 40% of landlords are paying over the asking price in order to secure the property they want. On average, investors are paying over 100% of the asking price for a buy-to-let property in England and Wales.
Aneisha Beveridge, Head of Research at an estate agency in London, commented:
“Tax and regulatory changes have weighed heavily on the buy-to-let sector over the last five years causing more landlords to sell up at a time when fewer new entrants were looking to buy.
“As a result, there are around 300k fewer privately rented homes in Great Britain today than at the peak of the sector in 2017. While we expect investors to continue purchasing at around the same rate over the course of 2022, it’s unlikely to be enough to make up for the full loss of rental homes during the last five years.
“A lack of rental homes is one of the reasons why rents have been rising at such pace over the last year. March set a new record for rental growth as rents bounced back from 2021 lockdown lows last March.
“But as these new buy-to-let purchases begin to feed into the lettings market over the coming months, we expect to see rental growth cool, particularly as the cost-of-living crisis weighs on affordability too.”