0:01 AM, 16th December 2024, About 4 hours ago
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Landlords remain resilient despite the stamp duty hike announced in the Budget.
Chancellor Rachel Reeves confirmed that the stamp duty surcharge on additional homes would increase from 3% to 5% immediately.
However, analysis by Hamptons claims the change has had little impact on landlord activity.
In November this year, 10.7% of property sales across Great Britain were to landlords, slightly above the 2024 average of 10.2%.
According to Hamptons, despite an overnight rise in costs, the number of investors pulling out of agreed purchases last month remained at half the level seen after the mini-Budget.
The data reveals that 28% of sales agreed by investors in the three months leading up to the stamp duty surcharge increase were either renegotiated or remarketed — around half the level recorded in the aftermath of the 2022 mini-budget, when mortgage rates rose sharply.
However, the increase in stamp duty in the South of England has made buy-to-let unviable.
Hamptons reveals that on a typical £300,000 purchase, an investor now pays £17,500 (5.8%). For a £500,000 purchase, the stamp duty bill for an investor stands at £37,500 (7.5%).
More landlords are now heading North, where stamp duty bills tend to be lower due to lower property prices. According to data from Hamptons, 18.4% of homes sold in the North East last month were bought by a landlord, 0.2% higher than November 2015 levels.
The average investor paid £115,000 for their buy-to-let, with their stamp duty bill rising from £3,450 to £5,750.
Aneisha Beveridge, head of research at Hamptons, says despite the stamp duty rise, landlords have remained optimistic.
She said: “Early signs suggest that new landlords have shown relative resilience to yet another cost increase. While the number of buy-to-let purchases by landlords remains muted by historic levels, their numbers have not collapsed.
“However, purchases are confined to the Midlands and Northern England which are becoming buy-to-let heartlands where the surcharge bites slightly less hard.
“While no landlord will welcome a tax rise, falling interest rates next year will likely push buy-to-let returns to near the top of investment league tables. With savings rates heading closer to 3%, gross yields in Northern England of above 8% will increasingly attract money that would previously have gone elsewhere. While political headwinds haven’t gone away, these risks and added costs are increasingly being priced into buy-to-let returns in the form of higher yields.”
However, according to the Hamptons lettings index, rental growth has slumped to its lowest level in four years. Average rents on newly let properties in Great Britain rose by just 2.6% over the past 12 months, the lowest annual increase since the 2.4% recorded in November 2020.
However, between November 2020 and November 2024, rents have increased by a total of 31.6%, outpacing average earnings. The fastest growth continues to be in Scotland and Northern England, where rents are up 7.2% and 5.7%, respectively, over the past 12 months.
The number of homes available to rent across Great Britain this year has consistently remained above last year’s levels, putting downward pressure on rental growth. There are currently 13% more homes to rent across Great Britain than in November 2023, when stock levels were near rock bottom.
Ms Beveridge explains: “After an unprecedented four-year boom, rental growth for newly let properties has slowed to a crawl. The current level of growth is similar to pre-covid times when rents typically rose between 2% and 3% a year. However, the forces that pushed up rents haven’t entirely gone away.
“Tenants renewing contracts continue to see increases well above these levels, but the pace of these increases will slow as their rents climb closer to market rates.”
