The buy-to-let boom is far from over

A year ago there were warnings that the buy-to-let market was looking increasingly bleak and that landlords were deterred from entering the sector, or quitting it altogether as a result of tax changes.

But despite scaremongering that there will be a ‘mass exodus’ of landlords, new data suggests that buy-to-let landlords are taking a far more pragmatic approach.

New data from Hamptons shows that last year 131,900 properties were sold by landlords in Great Britain, the smallest sell-off since 2013, when 105,830 properties were sold.

The research also reveals that the average landlord who sold up last year in England and Wales sold their buy-to-let for £82,450 or 42% more than they paid for it, having owned the property for 9.1 years on average.

The average landlord gross gain increased by £3,390 or 4% to £82,000 compared to 2019 – £79,060 – marking the first annual rise in more than five years.

Landlords in London made the biggest gains. The average London landlord sold their buy-to-let for £302,200 or 71% more than they originally paid for it, having owned the property for 9.8 years on average.

Last year reversed the fall in a London landlord’s gross profit.  Despite the increase, typically landlords who sold in the capital last year made a smaller gross profit than those who sold in 2016 when they made an average gain of £364,960. 2016 marked the high point for landlord profit when many investors, having bought at the bottom of the market following the 2008 financial crash, decided to sell up.

The top 10 local authorities where landlords made the biggest gains were all in London.

Kensington and Chelsea topped the list. Last year the average Kensington & Chelsea landlord sold their buy-to-let for £784,980 more than they paid for it 10.6 years earlier.  The gain they made was 9.5 times greater than the average in England & Wales.  Camden, City of Westminster and Hammersmith & Fulham ranked second and third on the list, with the average landlord gain exceeding £500,000.

Landlords in the North East continued to make the smallest gains. The average landlord who sold up in the North East made £11,310 or 16% capital gain having owned for 8.0 years. Some 36% of investors in the region sold their buy-to-let at a loss, compared to just 12% in England & Wales overall.

This means that 37% of investors who sold in the North East last year would have paid capital gains tax (CGT) due to the sum being covered by their £12,300 annual allowance.  Across England & Wales, 77% of landlords would have paid CGT on their profit.  London landlords, who made the biggest gains, are most likely to have a tax bill to pay with 91% of investors making a gross gain surpassing the annual CGT allowance.  Investors can offset costs such as stamp duty and renovation expenses from their capital gains tax bill.

The North East also had the highest share of landlords selling up.  Last year 24% of homes sold in the region were sold by a landlord.  This equates to around 9,730 homes.

Meanwhile, 17% or 15,540 homes sold in London were previously rented, down from 19% or 18,920 homes in 2020.

Some 9% of rental homes sold in Great Britain last year had been owned by a limited company landlord.  Last year,12,400 buy-to-let companies were dissolved. While the average buy-to-let company had operated for 6.2 years, 75% operated for less than five years.

Rental growth

In March, the average rent on a newly let home stood 4.4% higher across Great Britain than at the same time last year.  Regions outside London continued to see the highest rates of rental growth with rents increasing by 6.8% annually, the third consecutive month that annual rental growth outside the capital exceeded 5%. And apart from London, last month every English region recorded rental growth of at least 4%.

Rental growth in London continues to follow a different path, with rents falling 2.1%.  This marked the second month in a row that rents have fallen after turning positive between October 2020 and January 2021.  Once again, the fall has been led by Inner London where rents dropped 17.1%, the 13th consecutive month that rents have decreased.  While in Outer London, rents were 2.6% higher than at the same time last year, with tenants in Zones 3-6 viewing 48% more homes than in March 2020.

Aneisha Beveridge, head of research at Hamptons, said: “Last year, the number of homes sold by landlords reached a seven-year low.  A pause in the housing market during the first Covid-induced lockdown, which suppressed overall transactions, combined with an eviction ban throughout the remainder of 2020, limited the opportunity for landlords to sell up.

“Landlord sales have been relatively high over the last few years due to tax and regulatory changes that have reduced the profitability for some investors.  But given tax relief on mortgage interest will be fully phased out from the 20/21 tax year, it seems as though most landlords who would be hit hardest by these changes have already left the sector.

“Over the last few years, the average capital gain made by a landlord has been shrinking.  But despite the pandemic, stronger house price growth seems to have reversed this trend.  Landlords who have been in the game for the longest period of time have reaped the largest rewards.  The average landlord who owned their buy-to-let for more than 15 years made more than three times more than a landlord who had owned their property for less than five years.  Many of whom would have renovated and invested further in their property to add value.”

“Despite the gradual easing of lockdown, the London vs rest of the country rental growth divide remains entrenched.  Outside the capital would-be tenants are scrabbling over stock before it hits the portals, while in Central London landlords are chasing tenants just as relentlessly.  There are however signs of a return to Zone 1, with viewings up 64% year-on-year in March.  But record high stock levels mean rents are unlikely to start recovering to pre-pandemic levels until later in the year.”

Average landlord seller gain by region

Region Average Landlord Gain YoY Change £ Average % gain Average length of ownership (years)
London £                      302,200  £         3,760 71% 9.8
South East £                      102,200 -£         5,380 45% 9.2
East of England £                        90,590 -£         2,630 48% 8.9
South West £                        68,250  £         2,160 40% 8.6
West Midlands £                        50,240  £         5,220 42% 9.0
East Midlands £                        44,560  £         2,960 41% 9.1
Wales £                        37,120  £         1,170 38% 9.6
North West £                        34,780  £            170 36% 9.0
Yorkshire & the Humber £                        30,800  £            940 34% 9.6
North East £                        11,310 -£         3,500 16% 8.0
England & Wales £                        82,450  £         3,390 42% 9.1

Source: Hamptons & Land Registry

Top 10 local authorities where landlords made the biggest gains

Local Authority Region Average landlord gain Average length of ownership (years)
KENSINGTON AND CHELSEA London £784,980 10.6
CAMDEN London £735,230 9.8
CITY OF WESTMINSTER London £627,040 10.2
HAMMERSMITH AND FULHAM London £506,800 9.5
ISLINGTON London £473,860 10.2
HACKNEY London £392,690 10.2
WANDSWORTH London £365,220 9.4
BRENT London £355,260 9.6
HARINGEY London £354,090 10.2
HOUNSLOW London £347,790 10.9

Source: Hamptons & Land Registry

Annual rental growth

Mar-20 Mar-21 YoY
Greater London £1,699 £1,663 -2.1%
     Inner London £2,570 £2,131 -17.1%
     Outer London £1,534 £1,574 2.6%
East of England £967 £1,021 5.5%
South East £1,050 £1,132 7.8%
South West £832 £908 9.1%
Midlands £694 £732 5.4%
North £644 £688 6.8%
Wales £654 £700 6.9%
Scotland £673 £696 3.5%
Great Britain £982 £1,026 4.4%
Great Britain (Excluding London) £832 £889 6.8%

Source: Hamptons

Reapit 3
x

Email the story to a friend

6 Comments

  1. paulgbar666

    LL are selling up. They are just now prevented from doing so. It will take about 3 years for the massive pent up desire to sell up to fully occur. Just getting rid of tenants is a massive problem. Unless you wish to sell at auction no mass exodus will occur.   It will be a very slow and gradual process.   Make no mistake though the desire for LL to sell after the appalling treatment at the hands of this idiot Govt will not abate   LL have seen how they will be used as free Social Housing by Govt when national disaster occurs. Such LL will give up letting to AST households. The problems thay Govt has caused to LL for letting on AST make it a bankrupt business methodology. LL who have been in the game sometime are just biding their time to sell. There is now tenant demand that is not being met. Only mug LL are getting into the sector.   They clearly don’t understand the problems arriving soon. Their risk of course. Perhaps the real mug LL are those that use leverage.   Cash rich LL can easily survive long repossession processes. Just means they’ll have to cancel that holiday in the Maldives! A leveraged LL could ultimately find themselves bankrupt and homeless all caused by just one feckless rent defaulting tenant. So perhaps the mug LL are those that use leverage. The shrewd ones will be leverage free. Their position will be unassailable. One wonders how many cash rich LL there are? Certainly not enough to replace the leveraged LL who are selling up. Some of these LL may be converting to FHL though it looks like Govt will be coming for them soon.   It would not surprise me at all if Govt introduced S24 on FHL and SA mortgages. They will definitely be cracking down on 2nd homeowners gaming the system as FHL. In short anyone owning a mortgaged 2nd home should be very nervous!

    Report
    1. JMK

      The Times in running a story today on Boris letting out his own home (not the one he currently lives in!).  Let’s hope he experiences a bad tenant so he understands what we have to now endure.

      Report
  2. WatchingwithInterest

    Without stating the obvious – the market was closed for 3 months and most LL’s wait till end of tenancy or notice being given before selling, both of which were tempered.
    Make no mistake LL’s are still selling.

    Report
  3. Deltic2130

    This is a totally disingenuous headline and spin on the situation. That’s 11,000 properties a MONTH leaving the sector (save for those few that might be sold to another landlord), nearly triple the 4000/month the NLA were concerned about a couple of years back. And PIE of all people call that an unfounded claim of a mass exodus?!?!

    Report
  4. Will2

    I am a simple chap.  To see the state of property matters you only need to look at the agents boards. If one agent has too many I wouldn’t trust them either!  A few years back 95% of boards on properties were “To Let” or “Let By”.  Just look now at the balance in the state of the market.  Many more sale boards than let boards in part my of the world. This is even something the most challenged politician might be able to understand. I never take any of the self interest/self advertising articles as being gospel but treat them as a publicity stunt.  Over the years how Building Societies/Lenders publish stuff which I would not rely upon either, if you want data go to the Land Registry at least they have no “axe to grind”.

    Report
  5. smile please

    More of our landlords would be selling if they did not have to give 6 months notice.

    South of England is pretty much dead as BTL, of course some are still buying but nothing like years gone by,

    3% Surcharge on Stamp

    Mortgage Tax Relief Gone

    Climbing Market on prices

    The additional (some would say unfair) rights of tenants.

    No doubt increase in capital gains tax

     

    All of this i would agree with if the government actually provided social housing and not rely on the PRS to solve the housing issue in this country.

    Report
X

You must be logged in to report this comment!

Comments are closed.

More top news stories

Thank you for signing up to our newsletter, we have sent you an email asking you to confirm your subscription. Additionally if you would like to create a free EYE account which allows you to comment on news stories and manage your email subscriptions please enter a password below.