Blog: Why falling investment is bad news for us all

With new figures showing buy-to-let investment has fallen to pre-financial crisis levels, NRLA chief executive Ben Beadle looks at why a vibrant rental sector is essential for the country – and what can be done to encourage growth.

The figures make sobering reading. New data quoted in The Times this week shows that buy-to-let investment has fallen to the lowest levels since 2007.

According to figures from Hamptons, in the first four months of this year landlords purchased just 10% of all the homes sold in Britain – a significant dip since a high of 16% in 2015.

And it isn’t just Hamptons saying that, with the most recent mortgage lending data showing lending to landlords represented just 8% of all lending, down from 14% before the pandemic.

So, what is happening?

We know from research carried out by Pegasus Insights on behalf of the NRLA, that more landlords are planning to offload properties than to invest, with the latest data from quarter one of our regular landlord surveys showing 38% of landlords plan to sell and just 7% plan to buy.

Government figures from last year also showed that selling a property is the single biggest reason for a landlord to end a tenancy, and almost three times that of the next most common reason.

It also seems that investors are moving away from London and the south east to invest in the Midlands and the north, where, while average rents are generally lower, property is cheaper and yields better.

This is bad news for those looking to rent in the capital where, according to figures from Rightmove, rents have hit a 14th consecutive record high at £2,698 per month.

According to the Hampton’s data 65% of London-based investors bought a property outside the capital this year, up from 41% a decade ago and 24% in 2007.

Why are landlords selling?

When it comes to the why, it is clear the challenging legislative landscape is playing a huge part in landlords’ decisions.

Changes being introduced under the Renters’ Rights Bill, as well as potentially expensive energy efficiency upgrades have seen landlords become increasingly anxious.

This is compounded by a system of taxation which disincentivises investment, with George Osborne’s tax raids of 2015 casting a long shadow. The high cost of borrowing as also, undoubtedly had an impact.

It has been argued – anecdotally – that rental homes going up for sale are generally snapped up by other landlords. This data, however, seems to fly in the face of that presumption.

In short, these figures suggest the rental supply crisis we have been warning of for some time is set to get worse – a situation which will see the pool of available properties shrink, which in turn will not only impact tenant choice, but force rents up event further.

What is the answer?

A robust private rented sector is vital for this country. Renting is a positive choice for many people; it supports a strong economy by promoting labour mobility, it allows our children to fly the nest, it’s home to students keen to broaden their horizons at university, and, ever more frequently, it is housing those in later life.

These people need and deserve a safe, warm affordable place to call home. We landlords are here to provide that, but we too need support. We need reassurance that the new Renters’ Rights Bill will be implemented properly, with a court system and secondary legislation that is fit for purpose.

We also need to know that, should we need to make energy efficiency improvements, there will be financial support – and the available tradespeople to do the jobs in the timescales provided.

We also need assurances that there will be no further tax raids on the sector, with the latest data from members showing a massive 83% of landlords say a potential hike in capital gains tax is their biggest concern.

More than anything the Government needs to look at pro-growth measures to both reassure landlords and encourage them to do what they do best – deliver high quality private rented accommodation to those looking to the sector for a home.

More information

The Times article can be accessed here.

For more information on the NRLA's Renters' Rights campaign click here.

For more information on the Minimum Energy Efficiency Standards campaign click here.