Investors are continuing to buy rental homes despite higher mortgage rates and tighter regulation, but much of the activity is now coming from buyers acquiring properties from smaller landlords leaving the sector rather than large numbers of new entrants moving into buy-to-let.
New research from Hamptons found landlords accounted for the highest share of home purchases since 2016 this year, with investor demand strongest in parts of northern England where rental yields remain comparatively high.
However, the figures suggest the market is undergoing a structural shift rather than a broad revival in buy-to-let investment.
Many smaller landlords are selling off their rental properties as higher borrowing costs, tax changes and rising management and compliance costs put pressure on profits. That pressure has been particularly acute in London and southern England, where higher property prices have long produced lower rental yields than many northern regions.
Investors targeting areas where the figures work
At the same time, investors are continuing to target areas where the figures still work. Hamptons found activity was strongest in the North West and North East, where lower purchase prices and stronger rents continue to support returns despite elevated mortgage rates. Investor demand across London, the South East and the South West, in contrast, remained much weaker.
The research also shows how investment priorities within the sector have changed over the past few years.
Rental income matters more than house price growth
For many buyers, rental income now matters more than expectations of future house price growth. Investors are increasingly focusing on whether rents will cover mortgage repayments and running costs rather than relying on capital appreciation to drive returns.
And that approach has become ever more prevalent as landlords refinance onto significantly more expensive mortgage deals than those available during much of the last decade.
While rents have risen strongly across many parts of the country, higher finance costs are eroding returns in lower-yield markets, particularly for landlords with smaller portfolios or higher levels of borrowing.
Increased compliance and management obligations
The introduction of the Renters’ Rights Act has also increased compliance and management obligations across the sector, adding further costs at a time when many landlords are already facing tighter margins.
However, the same pressures pushing some landlords to sell are also creating opportunities for buyers with available capital.
Hamptons said a growing proportion of investor purchases now involve homes already operating within the private rented sector. Rather than being sold to owner-occupiers, many are being bought by other investors who still see long-term value in rental property, particularly in areas where tenant demand remains strong and supply remains limited.
Rental homes staying in sector
Separate analysis from Savills, cited by Hamptons, estimated that around 254,000 previously rented homes were listed for sale across Britain during the year to March, equivalent to roughly 700 homes per day.
While that has raised concerns about shrinking rental supply, Hampton’s figures suggest a significant proportion of those homes are remaining within the sector.
The result is a market that is becoming increasingly concentrated around investors able to absorb higher borrowing costs and operate profitably in a more regulated environment, while smaller landlords continue to reduce exposure or leave the sector altogether.
