Buy-to-let investors are weathering the storm

Landlords defy tax hikes to maintain their hold on the property market

Landlords now represent a higher share of the property market than before last year’s Autumn Statement Budget 2024, according to data that challenges the widespread belief that tax rises would deter investors. The latest analysis by Hamptons indicates that buy-to-let buyers accounted for 10.7% of all offers accepted across Great Britain in November. This is a notable increase compared to the 2024 yearly average of 10.2%.

The data comes despite warnings from landlord groups that property purchases would drastically fall following Chancellor Rachel Reeves’s Autumn Budget Statement 2024. The statement, delivered on 31 October, included a significant increase in the stamp duty surcharge for second homebuyers and property investors, raising it by two percentage points to 5%. For example, a landlord buying a £500,000 property now faces an additional charge of £10,000, jumping from £27,500 to £37,500.

Evidence of resilience in the buy-to-let market

Initial observations suggest that buy-to-let investors are weathering the storm. Despite the additional costs, there are signs of relative resilience, implying new landlords are still willing to enter the market. While buy-to-let transactions remain far below historical levels, there has been no catastrophic decline many had feared.

It’s worth noting the stark contrast with previous years. Back in 2015, before former Chancellor George Osborne introduced a series of tax hikes for landlords, buy-to-let buyers made up a significant 16% of all home sales. However, the fact that transactions continue rather than plummet altogether underscores landlords’ sustained interest in property ownership.

Shift towards affordability and yields

Landlords are now strategically targeting more affordable regions where rental yields are higher. The northeast of England proved especially popular, with 18.4% of November’s purchases in the region made by buy-to-let investors. This compares to 14.7% of landlord purchases in London, where property prices are significantly steeper. This shift highlights investors’ focus on maximising returns during uncertain economic times.

Meanwhile, the rental landscape has undergone noticeable changes. Following months of sharp increases, tenants’ rents have stabilised, rising at a more manageable pace. Data shows year-on-year rent growth stood at 2.6% as of November last year, aligning with trends seen before the Covid-19 pandemic. Britain’s average rent now sits at £1,382 per month, which remains a significant cost for many renters nationwide.

Impact on tenants and the wider market

The effects of these market shifts are also felt by tenants, particularly in the private rented sector. The National Residential Landlords Association (NRLA) has previously warned that a reduced supply of rental homes would have far-reaching consequences. According to the NRLA, the sell-off of rental properties since adding additional landlord taxes in 2016 has exacerbated housing pressures.

Figures paint a stark picture. Between April and June last year, 7,130 private rental households were granted council support for homelessness. This is a steep rise compared to the 5,400 households supported between October and December 2023. The NRLA has argued that failing to address such issues could deepen the affordability and availability crisis in the rental market.