The value of properties purchased by buy-to-let investors fell to its lowest level for five years during the first half of 2018.

What’s the latest?

Buy-to-let property purchases dived to a five-year low during the first half of 2018 as a raft of government tax hikes continued to dampen the sector.

Investment landlords collectively spent £12.1bn buying properties during the six months to the end of June, £5.2bn or 30% less compared with the same period of 2015, before higher stamp duty was introduced.

Investors not only purchased fewer properties, but they also opted for cheaper homes, shunning London and the south east in favour of less expensive regions in the north, according to estate agent Hamptons International.

Six out of 10 London-based landlords bought a property outside of the capital, compared with just 25% of investors in 2012.

Why is this happening?

The fall in the total value of property purchased by landlords was driven by a combination of investors buying fewer homes and those who did expand their portfolios purchasing cheaper properties.

Landlords bought a total of 64,260 properties in the first six months of 2018, 31% fewer than in the same period of 2015, while the average value of the homes they bought was £174,580 – 7% less than in 2016, although broadly unchanged from 2015.

The driving force behind the fall is likely to have been the introduction of the 3% stamp duty surcharge on second homes and investment properties, which was introduced in April 2016.

Landlords have also been hit by a number of other tax changes, including a tapering of mortgage interest tax relief and an end to the ‘wear and tear’ allowance.

These changes have made it less profitable to be an investment landlord, causing many to stop expanding their portfolios or exit the sector altogether.

One-bedroom flat in Kingston Upon ThamesAbove: This modern one-bedroom flat in Kingston Upon Thames could be a great buy-to-let. It's up for £285,000 with Dexters.

Who does it affect?

The fall in landlord purchases is bad news for tenants. There was already a mismatch between supply and demand in the sector, and these figures suggest it could get worse, putting upward pressure on rents. However, it could work in favour of first-time buyers, with fewer buy-to-let landlords to compete against when trying to purchase a home.

The south east has been the hardest hit by the trend, with the total number of landlord purchases falling by 45% compared with three years earlier, while in Scotland they are down by 44% and in the south west they are 40% lower.

All regions of Great Britain have seen a fall in the number of homes being bought by landlords since 2015.

The north east recorded the smallest decline, but even here purchase numbers were 11% lower than they were in 2015.

Number of homes purchased by landlords

  Homes bought by LL's (H1 2018) Change since H1 2017 Change since H1 2015
South East 7,980  -27%  -45%
Scotland 2,800  -19%  -44%
South West 5,510  -21%  -40%
London 9,070  -10%  -36%
East 5,330  -22%  -34%
Wales 3,070  -15%  -32%
Yorkshire & Humber 5,700  -17%  -25%
East Midlands 5,460  -6%  -23%
West Midlands 7,300  2%  -17%
North West 8,620  -9%  -16%
North East 3,520  -14%  -11%
GB 64,260  -13%  -31%

Sounds interesting. What’s the background?

The study also found that the average cost of renting a home rose by 1.6% during the year to the end of September, to stand at £980.

The cost of being a tenant increased in every region of Great Britain for the first time since January this year.

Wales saw the biggest rise at 3.9%, followed by the east at 2.8%.

At the other end of the spectrum, rents in Greater London edged ahead by just 0.1% year-on-year, but the capital still remained the most expensive place in which to be a tenant at an average of £1,714 a month.

Rents are lowest in the north at £650, followed by Scotland at £660.

Top 3 takeaways

  • Buy-to-let property purchases dived to a five-year low during the first half of the year

  • Investment landlords collectively spent £12.1bn buying properties during the six months to the end of June, a 30% fall compared with the same period of 2015

  • Investors opted for cheaper homes in northern regions over more expensive ones in London and the south east

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