More London based investors are purchasing buy-to-let homes outside the capital than ever before.
The proportion of London investors buying outside of London reached 50% in 2017 compared with 19% in 2011 (table 1). Last year, London investors bought over 22,000 (22,296), homes outside the capital up from 3,311 in 2010 when the Countrywide Lettings Index began (table 2). This is more than the number of homes sold in Manchester and Birmingham combined last year (21,951).
A record proportion of London investors are looking North in search of higher yields and lower stamp duty costs. The East has the highest proportion of London landlords overall with one in five homes (26%) bought by an investor sold to a London landlord (table 3). Nearly 1 in 10 (9%) homes in the North that are bought by an investor are sold to a landlord from London, up from 1 in 100 (1%) in 2010. In London only 12% of homes sold in April were bought by an investor, close to a record low.
By buying outside of the capital London investors are significantly cutting their stamp duty bills. Landlords buying in London face an average £40,400 stamp duty bill compared to £6,300 for an investor buying outside of the capital. The average stamp duty bill for an investor buying in London is now 73% more compared to pre-stamp duty changes (Q1 2016), but only 8% higher for an investor outside of London.
The average rent of a new let in Great Britain rose to £936 pcm in April, £4 more than the same period last year (£932). However, with 11% more homes on the market compared to the same time last year, rents in London have fallen for the sixth consecutive month, down 3.4% year-on-year. The East (-0.1%) and Scotland (-1.0%) recorded small annual falls for the first time this year. Rents also fell in Wales this month (-2.5%) (table 4).
Commenting, on the findings, Johnny Morris, Research Director at Countrywide, said:
“In response to slower price growth and government tax hikes, London landlords are looking further than ever to find a return. Lower entry costs and higher yields outside of the capital are enticing investors to look further afield than they have previously.
“Rental growth remains low across Great Britain. Mostly driven by London where rents have fallen for the sixth consecutive month. The repercussions of the stamp duty rush are still playing out in the rental market as stock levels continue to remain high. But with fewer investors buying in the capital we will likely see stock levels fall, driving future rental growth.”