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Buy-to-let landlords: Growing appetite to invest in UK property

During the first quarter of 2022, buy-to-let landlords have been the most active with property purchases since 2016. What’s behind this growth?

The appetite to invest in property across the UK has been on the rise. This is likely happening as buy-to-let landlords are finding ways to navigate legislative changes.

Additionally, the UK property market as a whole has remained remarkably resilient throughout recent economic uncertainty, and the rental sector is seeing ever-increasing demand.

The majority of people currently view bricks and mortar as the best investment choice. And landlords who invest in the right locations and earn strong rental yields and capital appreciation over the long-term are often reaping the biggest rewards.

More properties are being bought by landlords

In the first three months of the year, 13.9% of properties sold were bought by buy-to-let landlords, according to research by Hamptons. This is up from 12% during the same period last year.

Additionally, the figures for the first quarter of 2022 are the highest percentage of landlord purchases since the first quarter of 2016. During the initial three months of 2016, buy-to-let landlords accounted for 15.9% of all homes sold.

In April 2016, the 3% stamp duty surcharge was introduced for second properties and buy-to-let investments. Since then, purchases by buy-to-let landlords have hovered around the 10% mark.

Aneisha Beveridge, head of research at Hamptons, says: “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.”

Recent growth in the buy-to-let market

Overall, landlords bought 42,980 homes in Great Britain during the first quarter of 2022. This equates to £8.5bn worth of property, which is nearly twice the figure recorded pre-COVID in the first quarter of 2019.

Also, it’s the first time that buy-to-let landlords have bought more than they have sold since 2016. This shows the growth the private rented sector is currently seeing.

Recently, the buy-to-let market reached a record high of 8.7m homes. This puts the UK in fourth position in the world in terms of the size of its rental market.

High rental yields are becoming increasingly important

Investors are increasingly looking at the highest yielding areas of Great Britain as a way to hedge against inflation and maximise their returns. So far in 2022, 71% of buy-to-let landlords have bought in the 50% highest yielding areas. This is up from 57% a decade ago.

This is also one of the reasons nearly three quarters of London-based investors bought buy-to-lets outside the capital this year. The figure is up from less than a quarter a decade ago.

Additional research has shown that landlords are finding better yields, in addition to strong capital appreciation, in regional cities.

What are the top locations for buy-to-let landlords?

Hamptons found where the top 15 areas are with the highest percentage of properties bought by a landlord in the last six months. Of the top 10 locations on the list, seven are located in the north of England or the Midlands.

Middlesborough in the north-east took the top spot with 58% of properties bought by a landlord in the past six months. It also is home to the strongest average gross yield on the list with 8.9%. This is compared to the average of 6.5% across England and Wales.

Calderdale in Yorkshire and the Humber and East Staffordshire in the West Midlands followed closely behind with 50% and 48% of properties bought by investors respectively.

There are also larger areas on the list as well. Liverpool and Nottingham tied for seventh with 34% of properties bought by a landlord. Both locations also recorded an average gross yield over 7.0%.

Interestingly, many of the areas on the list also offer better value for money. More property investors are targeting the north and Midlands for higher yields and lower entry prices, and this is expected to continue in the coming years.

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