Landlords expanding their portfolios, and buying more homes is increasing the size of the rental market. Recent regulatory and tax changes have made it more complicated and more expensive for amateur landlords to enter the sector. There are 171,000 more homes to rent since 2015, but the number of landlords has fallen by 154,000 in the same period. As a result, the average portfolio size increased to a new high of 1.44 rented homes per landlord, up from 1.24 in 2010. This means there are less landlords owning more properties.
Traditionally, the average landlord only owned a single property, while those who owned multiple properties have been a minority. Today the growth of the sector is being driven by multi-property landlords expanding their existing portfolios rather than new landlords entering the sector. In 2007, single property landlords accounted for 84% of all property investors, while today they are just 73%.
The stamp duty tax on second properties introduced last year has discouraged many landlords from buying additional properties. The effects of the Stamp duty have been especially acute in the most expensive cities of the country. To avoid a large surcharge, London’s landlords have diversified their portfolios, buying in cheaper areas further away from where they live. Today only 71% of London’s landlords bought a buy-to-let property in the same region as opposed to 89% landlords in the North West of England.
Just before the introduction of the stamp duty, the market was flooded with rental properties from landlords rushing to beat the surcharge. High rental stock levels across Great Britain have put downward pressure on rents over the last year, but the effects of this have faded. With fewer landlords buying properties, the supply of available homes to let is starting to fall, supporting rental growth. In August the proportion of homes sold to landlords fell to 11.8%, down from an average of 16.4% in 2015, pre- stamp duty changes. As a result, rents in Great Britain rose 1.6% year-on-year, increasing for the second consecutive month in Greater London. Rents grew the most in the South West (4.7%), Scotland (2.8%) and East of England (2.5%).