British Landlords Head North:
Buy-to-let investors made up 26% of all purchases in the year to date
A further 25% of Brits plan to invest in North East property to generate income for their retirement
This comes as 21% of landlords in the South West reported that they have lost thousands
David Hannah, Group Chairman of Cornerstone Tax, the UK’s leading property tax experts, discusses the various factors for the exodus of landlords to the North East
New data has highlighted a rapidly changing buy-to-let market. Investors affected by the increase in interest on their mortgages have begun chasing higher rental yields in the North East of the UK, cementing its status as the buy-to-let investment capital of Britain, with landlords attracted by its low house prices and relatively high rent. Hamptons reported that 26% of all property purchases in the year to date in this area were from buy-to-let investors. Exclusive new data from property tax experts, Cornerstone Tax, has found that a further 25% of Brits plan to invest in buy-to-lets in the North East to generate income for their retirement compared to just 19% in the South.
The recent increase in mortgage rates and falling real wages have hammered buyer demand, with a 7.5% average drop recorded nationwide. Traditionally attractive areas of investment, such as the South West and East Midlands, reported that sales are down by 11.4% and 15.3%, according to TwentyCi. Buy-to-let landlords in the South of the UK have taken the financial brunt of the consecutive rises in interest rates coupled with the increase in inflation of energy bills and general running costs. New data found that 21% of Brits in the South West became a landlord without sufficient knowledge and have lost thousands as a result, with a further 26% in the East Midlands also reporting a loss.
With no financial incentives to remain, the landlord’s exodus to the North is inevitable. The average cost of a property in the North stands at £178k compared to £465k across the South of the UK, according to Plumpot. As a result of lower mortgages, and the promise of higher rental yields, TwencyCI has reported that new rental instructions are up 12% in the North East, versus 6% nationally. Notably, Newcastle was the strongest performing city in the country, with sales up 6.6% compared to the start of 2019. Cornerstone’s landmark data points out that this is only set to increase with 28% planning to invest in property in the city to generate income for their retirement.
David Hannah, Group Chairman at Cornerstone Tax, discusses the current landscape of the buy-to-let market:
“The end of tax relief on buy-to-let mortgages, which came into full effect in 2020, coupled with the increasing rates of interest on mortgages, has amplified the blow on landlords’ profit margins, meaning that investors care more than ever about securing higher yields. The situation has been particularly exacerbated for houses in multiple occupations (HMO) – these are landlords who typically include the costs of energy, heating, and other bills into
“It makes sense that we have seen an exodus of landlords to the North East of the UK. For many landlords, this is their full-time income being affected and as the data shows across some areas of the South this is becoming increasingly difficult. Our data found that just 1-in-5 now say their investment has been a profitable one, so it’s vital that prospective landlords do their research before deciding where to invest.”