Investors are increasingly looking northward for opportunities in a bid to mitigate against high mortgage and stamp duty costs. Our latest research reveals that a record 39% of buy-to-lets purchased in the first four months of 2025 were located in the Midlands or North of England, up from 34% in 2022 when interest rates began to rise and significantly higher than the 24% recorded when our records began in 2007.
This shift comes as overall buy-to-let investment has fallen to levels not seen since 2007, with investors purchasing just 10% of homes sold across Great Britain in the first four months of 2025, down from 11% in 2024.
Why are investors heading north?
The migration of investment capital to northern regions is being driven by several factors. Lower property prices, which coincide with a smaller stamp duty bill, combined with higher rental yields, are all playing roles in this geographical shift and tend to provide landlords more headroom.
The average investor buying in the Midlands and North of England paid £150,480 for a new buy-to-let this year – £141,760 (or 49%) less than a landlord who bought in the South of England, where the average purchase price was £292,240. This price differential translates to a £11,190 savings on stamp duty.
Rental yields also tend to be higher in northern regions. In the North East, which remains the capital of buy-to-let investment, the typical new buy-to-let achieved a 9.3% gross yield, outperforming the national average of 7.1%. This higher yield provides investors with greater financial headroom to cover increasing costs related to mortgage payments, maintenance, and taxes.
Regional variations in buy-to-let investment
The North East stands out as the only region in Great Britain where buy-to-let purchases have increased over the last decade. Landlords purchased 28% of homes sold in this region so far this year, up from 23% in 2015. This is in contrast to other regions, particularly Wales and London, which have seen significant declines.
In Wales, the share of homes bought by landlords has fallen by nearly two-thirds over the last decade, with investors making up just 6% of all buyers so far this year, down from 16% in 2015. Similarly, in London – the most expensive region with the lowest rental yields – investors purchased 8% of homes sold so far this year, a figure that has more than halved since 2015 when they made up 16% of all buyers in the capital.
Scotland, where tighter rental regulations and rent caps have been introduced in recent years, has the lowest levels of investment, with landlords purchasing just 5% of homes sold this year, half the 10% levels seen a decade ago.
Buy-to-let hotspots emerge in the North
Nine of the top ten buy-to-let hotspots since the stamp duty surcharge increased from 3% to 5% in November 2024 are located in the Midlands and North of England. Redcar and Cleveland tops the list, where investors purchased 50% of all homes sold. In this area, the typical landlord spent just £70,300 on their new buy-to-let, resulting in a stamp duty bill of £3,515.
Eight of the ten local authorities on the hotspot list offered gross rental yields above the England & Wales average of 7.1%, with many approaching double-digits.
London investors looking beyond the capital
With stamp duty bills becoming a significant barrier to entry in London, an increasing number of London-based investors are buying properties outside the capital. Nearly two-thirds (65%) of London-based investors bought a buy-to-let outside of the capital this year, up from 41% a decade ago and just 24% in 2007.
The crossover point when London investors became more likely to buy outside the capital came in 2018, just after the 3% stamp duty surcharge on second homes was introduced in 2016 and when tax relief on mortgage interest for higher-rate taxpayers began to be phased out.
Lower entry costs encouraged 18% of London-based investors to purchase a buy-to-let in one of the three Northern regions this year, more than triple the share (5%) who did so a decade ago. This represents a significant change in investment strategy for London-based landlords who have traditionally focused on properties within the capital and closer to home.
The yield advantage
Investors are increasingly focusing on higher-yielding areas to ensure profitability after accounting for higher mortgage costs, maintenance expenses, and taxes. This year, a record 23% of buy-to-let purchases achieved a double-digit yield, up from 17% in 2024 and 9% in 2016, partly reflecting the shift towards Northern areas where yields tend to be higher.
On the typical buy-to-let purchase costing £198,550, each 1% rise in the gross yield brings in an extra £1,985 a year in rental income. If a landlord invested £198,550 in the North East, they would earn an average of £18,400 in rental income each year – £7,010 or 62% more than if they invested the same amount in London. However, over the long run, property prices in the capital have generally increased more, potentially offsetting some of the yield advantage of northern properties.
Rental growth trends
Slower rental growth on the open market and falling mortgage costs mean fewer landlords are putting up the rent when a tenant renews their contract. In April, 45% of landlords in Great Britain increased the rent when a tenancy was renewed, down from a high of 50% in April 2024.
The average rent on a renewal in Great Britain reached £1,257 per calendar month in April, £44 (or 3.7%) more than the same month last year. Meanwhile, the rent on a home where a new tenant moved in rose by just £17 (or 1.2%) year-on-year. However, the pace of rental growth for renewed tenancies has slowed from a high of 9.2% in October 2023.
Despite renewal rents catching up, a gap still exists. The average rent on a new let has increased 36% over the last five years, while renewals have lagged at 28%. This means in cash terms, tenants renewing a contract pay £103 per month less than tenants signing a new contract.
In London, rents on newly let properties have been falling for the last five months. The average rent in the capital fell 1.4% year-on-year in April, while renewal rents increased by just 0.5%. Only 23% of landlords in the capital increased the rent upon renewal in April, down from 37% in April 2024.
Looking ahead
Based on current trends, 2033 will mark the point at which the bulk of buy-to-let purchases are in the Midlands and North of England, rather than the South. However, this shift could cost the Treasury £161 million – a 12% annual fall in revenue due to investors purchasing cheaper properties that come with lower stamp duty bills. This may also have knock-on effects on rents if supply conditions in the South of England worsen, particularly in areas where tenants' finances are already stretched.
Nevertheless, investors will still find opportunities in the South of England, particularly if rents continue to rise and house prices pick up pace after nearly a decade of stronger capital growth further North. Lower interest rates will also help, not only by lowering mortgage costs but by reducing rates available on savings accounts, which might make buy-to-let look more appealing compared to other investment options.
