Investor purchases have dropped in all regions except the West Midlands and the East of England, with the North East of England, Britain’s buy-to-let hotspot, seeing the biggest falls.
Landlords made up 31% of buyers in the North East in February, but last month this dropped to just 13% – the lowest figure recorded in any May since 2016, just after the introduction of the 3% stamp duty surcharge on purchases of additional homes. This also comes despite the region having the cheapest property prices in the country, meaning that the stamp duty holiday makes less of a difference.
By contrast, London is the most expensive region so the tax break has the biggest impact. On a £450,000 property, landlords could reduce their tax bill by £10,000 – from £23,500 to £13,500 – if they could complete before the nil-rate band is reduced from £500,000 to £250,000 on 1st July.
We expected the ending of the stamp duty holiday to hit hardest in the capital and that has proven to be the case, with the region recording the second biggest drop-off in landlord purchases. Landlords bought 5% of homes in London in May, down from 15% in February and an average of 10% in 2019. In fact, May’s figure represented the lowest share of London homes bought by landlords seen in any month since our records began in 2009.
Investors have been put off the buy-to-let sector in recent years by regulatory and tax changes. In addition to the 3% surcharge levied since April 2016, tax relief on mortgage interest payments was gradually reduced from 2017/18 until it was removed entirely last year. However, the stamp duty holiday does seem to have encouraged more small and first-time investors into the market, especially because interest rates on cash in the bank are so low.