Property Investors Buy 30,000 Fewer Homes in 2022

Buy-to-let is shrinking even though property investors are snapping up one in eight homes on the market.

New research shows investors are buying the highest proportion of homes for sale since 2016, but total investment purchases are likely 30,000 homes fewer than last year.

The study by estate agency Hamptons says many landlords failed to find viable deals because of competition from first-time buyers and rising prices.

Aneisha Beveridge, head of research at Hamptons, said: 

“Rising rents are tempting landlords to dip a toe back into the slowing sales market to try and pick up deals they couldn’t have got six months ago.  With sellers more open to negotiation and rents rising rapidly, returns for equity-rich landlords have been rising.

“While we’re unlikely to see landlords return to buying at pre-stamp duty surcharge numbers, it’s possible they may outnumber first-time buyers in some months next year, as was common before 2016.”

Average rent up £117 in a year

Meanwhile, a separate study by online property portal Zoopla says the average rent for a new letting has risen by £117 during the past year, driving prices up to £1,078 a month - representing 35 per cent of an average single earner's income.

A review of the buy-to-let market shows rents are increasing due to chronic supply problems, with the number of available rental homes down four per cent from a year ago. In contrast, demand from home hunters is soaring.

Richard Donnell, executive director at Zoopla, said: "Renters are paying the price for low levels of new investment in private rented housing over the last six years. A chronic lack of supply is behind the rapid growth in rents which are increasingly unaffordable for the nation's renters, especially single-person households and those on low incomes. Many are also staying put to avoid the worst of rent increases.

“Renters are having to adopt a range of strategies to deal with rising rents. We have seen a rapid increase in demand for 1 and 2-bed flats while some renters are now considering sharing a property to cover the cost of rent. Others may now need to stay at home with parents or relatives for longer until they can afford to rent privately.”

Rents to keep rising

Rent data from tenant referencing firm Homelet says the average UK rent is £1,175 a month - up 11.1 per cent from 12 months ago and 0.3 per cent higher than in October.

Average rents in London are even higher - averaging £2,011 a month.

The highest monthly rent growth is in the North West (up 1.2 per cent), where average rents are £871 monthly.

Homelet CEO Andy Halstead said: “Landlords are concerned about the ability of tenants to pay their rent and potential new legislation, which has contributed to a shortage of available rental properties. This lack of supply to meet the demand is sure to see prices continue to rise at a time when the cost-of-living crisis is making things difficult for many people on all fronts.

“We will likely see a challenging year for the private rental sector in 2023. In a recent survey of landlords from Homelet with Dataloft, four out of 10 landlords (40%) named the cost-of-living crisis and its effect on the ability of tenants to pay rent as their biggest concern over the next 12 months.

“The concerns appear to be well founded, as a concurrent survey of 12,000 tenants revealed that just one in ten (11%) think the cost-of-living crisis will not impact their ability to pay rent.”

How have rents changed in your area

Source: Homelet

Buy-to-let rents FAQ

Why do rent indices show different results?

Check the data carefully. The various indices cover different periods, and the demographics of the samples vary between reports.

The Office for National Statistics (ONS) has the most extensive sample, so it should return the most reliable figures. Still, the time to collect and analyse the statistics often means the ONS data lags a month behind the rest of the sector.

The Association of Residential Letting Agents (ARLA) derives insights from letting agents and provides a sentiment survey rather than measurable data.

Homelet, Halifax and Nationwide statistics come from customer data, which may not fully reflect the market.

Should landlords raise rents in line with the stats?

That's a business decision for landlords. Rent statistics indicate how the market moves but do not reflect demand from tenants and property standards in local neighbourhoods.

Don't forget that the data is historical, showing what's happened rather than what will happen.

Which rent index is the best?

That's up to individual landlords. For instance, one index with a solid customer base in the same area as a landlord's portfolio may align more closely with market rents for that neighbourhood.

Average data is not good if you don't have an average home, and median rents will cover everything from a room in a shared house to a four-bedroom home.

Extra research with local letting agents is likely to indicate better where a landlord should pitch a competitive rent and stop them from underselling.

How has coronavirus disrupted the statistics?

Although several letting agents and property organisations publish regular rent statistics, many have been affected by the coronavirus lockdown that has their reports suspended or delayed.

Rent statistics indicate how the market moves but do not reflect demand from tenants and property standards in local neighbourhoods.

Don't forget that the data is historical, showing what's happened rather than what will happen.