Investors are increasingly turning to the highest yielding areas of the country as a way to maximise their returns and hedge against inflation. So far this year 71% of investors bought in the 50% highest yielding areas of the country, up from 57% a decade ago. It’s also one of the reasons why nearly three quarters (73%) of London-based landlords bought their buy-to-lets outside the capital this year, where yields tend to be higher, up from less than a quarter (24%) a decade ago.
Nevertheless, a large proportion of properties bought were previously rented – in other words, landlords have simply been buying properties from other landlords. So far this year a record 41% of homes purchased by investors had previously been let – and this figure has been rising steadily in each year since 2018, when it stood at 25%.
Energy performance certificate requirements for landlords, coupled with more onerous regulation and rising costs increasingly mean that buy-to-let will only make financial sense on some properties and in certain areas. This means investors are even more likely to buy and sell from each other in the future.
House price growth has consistently outperformed inflation, both historically, but also more recently as it heads towards the Bank of England’s 8.0% expectation. And so it’s unsurprising that investors have doubled down on property. However, rising interest rates are likely to temper the surge in sales to landlords below 2016 levels as servicing a mortgage gets more expensive and returns elsewhere begin to pick up.