Investors bought £8.5 bn of property in the first quarter of 2022 (Yui Mok/PA)
(Picture: PA Wire)London is in the grip of a rental supply crisis as low stock levels and a post-pandemic surge back to the capital combine to create a perfect storm.
But the drought of rental homes could start easing in coming months or years, as new research shows landlords are purchasing buy-to-let properties again.
Investors bought £8.5 billion worth of property — equating to 42,980 homes across Britain — in the first three months of this year. It is twice the figure recorded pre-pandemic in 2019, and the first time since 2016 that more property has been bought than sold, according to data from estate agent Hamptons.
According to Hamptons, the increase in buy-to-let purchases could help reverse the decline of the rental sector. Landlords have been pulling out of the market for years, pressured by taxes and regulation, and causing the number of rental properties to shrink by 300,000 from the peak of 5.3 million in 2017.
The shortage in housing stock has been exacerbated by a wave of people returning to London post-pandemic. This has sparked a flat-hunting frenzy with bidding wars and queues for viewings now commonplace in the capital.
The number of rental properties available in London last month was down 44 per cent on 2021. Some of the most popular places to live such as Islington, Lambeth, Hackney and Camden saw disastrous falls of more than 50 per cent compared with last year.
Aneisha Beveridge, head of research at Hamptons, said: “A lack of rental homes is one of the reasons why rents have been rising at such pace over the last year. March set a new record for rental growth as rents bounced back from 2021 lockdown lows last March.
“But as these new buy-to-let purchases begin to feed into the lettings market over the coming months, we expect to see rental growth cool, particularly as the cost of living crisis weighs on affordability too.”
Beveridge added that while landlords are purchasing more homes in the capital than last year, it probably “won’t be enough” to make up for the fall in stock, and rising tenant demand.
Dan Wilson Craw, deputy director at Generation Rent, said: “While private rented homes have declined in recent years, this has been matched by a rise in the number of mortgage home owners, as private renters have finally been able to buy.
“What is really pushing up rents is the long standing failure to build enough homes – particularly social housing that people on low incomes can afford.”
While London landlords are buying up property in the capital, a record 73 per cent are buying elsewhere, up from just 24 per cent a decade ago.
The biggest year-on-year rise in buy-to-let purchases was seen in the North East, where gross rental yield reached nine per cent, compared to six per cent across England and Wales.
While northern areas dominated the top 15 list of buy-to-let locations, London’s cheapest borough of Barking and Dagenham number 12 on the list.
The data also shows the average cost of a new let in Britain rose to £1,115 per month, up from its low of £1,022 per month in March last year. Rents in Inner London saw the strongest growth, jumping 21.3 per cent to an average of £2,571 per month.
