Southern England Sees Record Decline in Buy-to-Let Property Purchases

Recent data from Paragon Bank shows a significant shift in the buy-to-let (BTL) property market, with Southern England experiencing a record low in the proportion of properties purchased by landlords, exacerbated by higher Stamp Duty costs.

Sharp Decline in Southern Buy-to-Let Investments
The trend of declining buy-to-let purchases in the South is stark, with only 35% of such properties purchased in 2023 across the South East, Greater London, and the South West. This figure has steadily dropped from 52% in 2015, the year before the introduction of the Stamp Duty surcharge on additional properties. “The introduction of the Stamp Duty surcharge disproportionately impacted those markets with above-average house prices in the south of England,” said Richard Rowntree, Managing Director of Mortgages at Paragon Bank.

This reduction marks a significant shift from the peak in 2015 and even shows a decrease from 39% in 2022, highlighting a continued trend away from Southern investments following temporary spikes during the 2020 and 2021 Stamp Duty holidays.

Regional Shifts in Buy-to-Let Market
In contrast, areas such as the North West and Yorkshire & Humber have seen increases in buy-to-let acquisitions, growing from 9% to 14% and 6% to 10% respectively, from 2015 to 2023. Meanwhile, the South East, London, and the South West have all seen their shares decrease, with London dropping from 19% to just 12% of the UK total.

The shift suggests a realignment of the buy-to-let market towards regions with more affordable property prices, which have not been as severely affected by the Stamp Duty surcharge.

Future Projections and Market Needs
Rowntree highlighted the pressing need for more rental properties across the UK, particularly in Southern regions like London, where the demand for rental homes is continuously fueled by a transient population. “With the population forecast to increase by 9.9% – or by 6.6 million people – by 2036, demand for rental property is only going to be stronger,” he explained.

He highlighted the importance of ensuring a supply of fairly priced, decent quality rental homes to meet the growing demand. “Unless supply is boosted to meet forecast growth in demand, rents will only grow higher in markets with extreme supply/demand imbalances,” Rowntree added, calling for measures to invigorate the private rented sector and ensure it can accommodate the diverse needs of renters.