8 February 2019
Landlords adapt investment strategies to confront new taxation laws and find higher yields
Landlord purchases fall by £5.2 billion in 3 years
In adapting to a new tax environment – landlords are buying fewer properties and spending less too.
The total value of homes bought by landlords has fallen considerably over the last few years. In H1 2018 landlords spent £12.1 billion purchasing rental properties, £5.2 billion – or 30% less – than in H1 2015, when the figure reached £17.3 billion in Great Britain.
As a result, the total value of homes purchased by landlords has reached the lowest level in five years, having peaked in H1 2016 at £21.2 billion, when second homeowners rushed to beat the 3% stamp duty surcharge which was introduced in April 2016. In London, landlords spent £3.5 billion purchasing rental homes in H1 2018, 40% less than in H1 2015 and 22% less than H1 2017 (table 1).
Table 1: Total value of homes purchased by landlords in Great Britain & London
The fall in the total value of landlord purchases has mainly been caused by the fall in the number of investors purchasing buy-to-let properties. But it’s also a consequence of landlords adapting to their new tax environment, and spending less on the properties they do buy, as they increasingly head further North. In H1 2018 landlords purchased 64,260 homes in Great Britain, down 13% year-on-year and 31% less than in H1 2015.
However, the average price of a home bought by a landlord fell to £174,580 this year – 7% less than in 2016 – despite average house prices rising over that period. This fall has been additionally fuelled by more landlords purchasing cheaper buy-to-let homes further North, in search of lower stamp duty bills and higher yields (table 2).
Table 2: Proportion of London Landlords purchasing properties elsewhere in the UK
This is 10% more than last year and over double the proportion in 2012. As a result, the average landlord based in London spends a quarter less on their buy-to-let property than they did in 2016.
This just goes to show that even though the taxation clampdown on landlords introduced in 2016 resulted in fewer landlord purchases, many landlords appear to be adapting their investment strategy to the new environments quite well.