The proportion of buy to let property investments made by landlords hit a nine year low last year, at just 12.5 per cent.
Countrywide’s latest monthly letting index found that higher taxes have started to deter investors. Between 2016 and 2017 the proportion of homes sold to landlords declined in every region. This trend was most prevalent in London, with 5,400 fewer homes acquired by a landlord year on year.
As a result, there are now fewer homes available on the rental market. In December 2017 there were 4 per cent fewer homes available to rent across Great Britain in comparison to December 2016. London saw a sizable fall of 21 per cent. However, although there has been a decline in stock due to the stamp duty rise, there were 5 per cent more homes available than two years ago.
The decline in investment came in spite of the fact that rental growth in the UK picked up in 2017, with rents up by an average of 2.4 per cent in 2017. This is up from an increase of 1.8 per cent in 2016. At the end of the year the average rent stood at £960 per month, up by £23 per month on the start of the year. Rents rose a third faster than they did in 2016. However, rental growth remained behind the 3.2 per cent recorded in 2015 and 2014.
Higher taxes also encouraged landlords to offset their costs, with 46 per cent increasing rents when re-letting their homes.
London saw the fastest rate of rental growth in England last year, up 3.2 per cent.
Research director at Countrywide, Johnny Morris, said: ‘Last year saw the rate of rental growth pick up to get closer to its long-term average. Most of the rise comes from a pickup in rental growth in London, after falls in 2016. Rents rose across every region of Great Britain last year, although the north of England saw rents rise at a slower rate than they did in 2016. Rental growth has been supported by a fall in the number of homes on the rental market, with the biggest fall in London. It looks like increased competition between tenants for rental homes will drive faster rental growth in 2018.’