Landlord Investment in London Plummets, Causing Rents to Surge

Landlord investment in London is plummeting – even among those based in the capital – causing rent prices to surge to record highs in the region, according to Hamptons International.

There has been a sharp decline in the number of buy-to-let landlords investing in London’s property market since the 3% Stamp Duty surchargewas introduced three years ago, new data from the estate agent reveals.

Even London-based investors, who historically purchased their properties near to where they lived, are now deterred from buying in the capital, with Hamptons revealing that 59% of London-based landlords acquired their buy-to-let properties outside of the capital during the last 12 months, which is up from 25% in 2010.

High house price growth and a clampdown on landlord taxes have left more London-based landlords with little alternative but to invest further afield in search of higher rental yields and lower Stamp Duty bills.

The proportion of London-based investors purchasing buy-to-lets in their home region has dropped by 17% since 2015 (before the Stamp Duty surcharge on additional properties was introduced in April 2016).

The research found that 34% of London-based landlords purchased buy-to-lets in the Midlands and north during the past 12 months, which is up from just 14% in 2015 and 4% in 2010.

However, the South East remains the most popular location for London-based investors to purchase buy-to-lets outside of the capital.

Some 11% of London-based landlords invested in the South East over the last 12 months – 2% fewer than in 2015.

Dartford is the most popular destination for London-based investors in the South East. Landlords living in London purchased 60% of buy-to-lets in the town during the last year.

Aneisha Beveridge, the Head of Research at Hamptons International, comments: “April marks the three-year anniversary of the Stamp Duty surcharge introduction for second homeowners.

“Following the tax hike, landlords have been adapting their strategy to find new ways to make their returns. Lower entry costs and higher yields outside of the capital are enticing investors to look further afield than they have previously.”

Following this decline in landlord investment in London, rent prices surged by an average of 3.7% in the year to March, causing growth across Great Britain to hit 1.9% year-on-year.

Hamptons’ data shows that the average cost of a new let in Great Britain rose to £969 per month in March, as rent price growth continues to rise, led by Greater London, where the average rent reached £1,737 – the highest level on record.

Meanwhile, Scotland was the only region where rent prices fell in March – down by an average of 0.1% on the same month of 2018.

Beveridge says: “Following a sluggish 2018, London rents reached a record high in March. The average cost of a new let in London rose to £1,737 per calendar month in March – 2.3 times more than the average rent outside the capital.

“Meanwhile, every region in Great Britain recorded rising rents last month, other than Scotland.”