Hamptons said this was the lowest level of sales since 2010 and less than the 15% share of homes landlords purchased in 2015, just before tax and regulatory changes were introduced.
Compared to last year, this was down by 1%.
Hamptons said this affected the appeal of buy-to-let (BTL) investment and added that more recently, this was further impacted by high mortgage rates, political uncertainty and the potential of new rental regulations coming in.
It found the share of purchases made by BTL investors had been declining over the year and reached a low of 9.7% in June.
If this continues, Hamptons predicts there will be 113,630 new BTL purchases this year, a reduction of 75,900 or 40% compared to 2015.
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Fewer rental properties despite drop in landlord sales
Although landlord purchases have been decreasing, the share of homes sold by landlords has been falling for the last three years, Hamptons found.
Private landlords have accounted for 13% of sellers so far this year, down from 14% last year and 16% in 2022.
However, the level of purchases made by landlords is being outstripped by disposals, which Hamptons said was reducing the number of rental homes.
The firm said this trend began in 2016 when the 3% surcharge of second home purchases was brought in and tax relief on rental income was scrapped.
It predicted that 146,060 more homes would be sold by private landlords this year, offsetting the 113,630 estimated purchases.
This will mean private landlords have sold 328,750 more homes than they have bought since 2016, Hamptons suggested.
Hamptons said institutional investments into larger rental developments such as build to rent had filled some of this gap, but there were still fewer homes available for rent. In June, there were 42% fewer rental homes in Great Britain than the same month in 2016.
Aneisha Beveridge, head of research at Hamptons, said: “Rather than a mass landlord sell-off, the lack of homes available to rent has been caused by fewer investors entering the market. Tax and regulatory changes introduced since 2016 have been the main culprit, but these disincentives to invest have been compounded more recently by higher interest rates and political uncertainty around the threat of more rental reform.
“If investor purchases and sales continued at 2015 levels, there would likely be 450,000 more private rental homes in Great Britain by the end of this year. This is roughly equivalent to the total number of homes in Birmingham. Most investor purchases this year have been driven by cash-rich, larger portfolio landlords who continue to expand their portfolios.”
Landlords investing in high-yield regions
The research found that since 2015, landlord purchases had declined in every region except the North East, which was also the highest yielding area.
The share of BTL homes purchased in the North East rose marginally from 24% in 2015 to 25% this year.
London, which has the lowest yields, saw the largest drop in new landlord purchases, falling from 17% in 2015 to a low of 8% in 2024.
The lowest level of BTL investor purchases was in Scotland, making up just 5% of the market so far this year, down from 10% in 2015 and 7% in 2019. This aligned with stricter rental regulations brought in during Covid, and the introduction of a 6% stamp duty surcharge on second homes in 2022.
Rising yields and rents
Hamptons said strong rental growth and stagnant property prices pushed the average yield for a new BTL investor in England and Wales to 7.3% this year. This was up by one percentage point on 2015 and higher than the average yield of 7% in 2023.
This means an average investor would earn an additional £1,906 per year in rent on a £200,000 purchase than if they had bought in 2015.
Some 16% of new investors had a gross yield that was higher than 10%, up from a share of 14% of landlords achieving a similar return in 2013.
Hamptons recorded a continued rise in rents in June, finding that the average tenant paid £1,347 per month for a new home. This was 5.8% or £74 higher each month than it would have been last year. The firm said this meant rents were increasing nearly three times faster than inflation, which was 2% in June.
The biggest rises were in Scotland, where rents on newly let properties rose 11.1% annually. London recorded the slowest pace of rental growth, with a 2.7% yearly uptick, which was also the weakest growth recorded since October 2021.
Hamptons said this was dragged down by inner London, where rents fell for the third month in a row following annual growth of 14.8% this time last year.
In contrast, rents in the North of England are still rising at a double-digit pace.
Beveridge added: “The lack of supply is one of the main factors underpinning strong rental growth and this is unlikely to reverse any time soon. The challenge for the new Government, which is keen to boost homeownership, is to increase security and the quality of homes for tenants living in the rental sector without disincentivising or pushing out more landlords.
“While some of the homes that previously would have been bought by an investor have found their way into the hands of a first-time buyer, high mortgage rates and rising rents are likely to lock out many would-be homeowners over the next few years, keeping them in the rental sector for longer.”
This article was first published on YourMoney.com‘s sister site, Mortgage Solutions. Read: Buy-to-let property purchases drop to record low – Hamptons
