New homes being snapped up by BTL investors given exceptional regional city yields

Created: 28 Apr 2022

The number of new residential properties entering the UK market, and housing units on sale, have risen over the course of the last year, as burgeoning supply seeks to match the overwhelming demand for residential properties across the UK. Exceptional rental yields, particularly in regional cities, have led to landlords and buy-to-let investors becoming exceptionally active in snapping up this inventory.

A historic shortage in housing, relative to demand, has served to accelerate rental increases across the United Kingdom. The latest quarterly Rightmove price tracker indicates that average asking rents are £1,068 per month outside London, and £2,142 within the capital. This represents 9.9 per cent and 6.1 per cent growth respectively, their fastest quarterly rate increases on record. 

Data from Knight Frank and the latest RICS Residential Market Survey  demonstrates that housing supply has begun to normalise. New instructions are up with a net positive (+8 per cent) balance of surveyors reporting an uptick in listings. Furthermore, Rightmove data indicates that the number of available properties has risen 7 per cent since December 2021. 

Given the appeal of ongoing robust yields, low interest rates, and tenant demand that is up 32 per cent annually, buy-to-let investors and landlords have taken advantage of growing supply to buy 42,980 homes in the UK over the first quarter of 2022. This property, valued at £8.5bn in Hampton research, was approximately double the amount purchased by this group in the first quarter of 2019. 

With lower capital entry costs, higher yields, and greater demand that ensues from greater affordability, regional cities have shot up the priority list for BTL investors. Hamptons data reveals that the number of London-based investors purchased BTL property outside the capital has ballooned from under 25 per cent in 2012 to over 75 per cent in 2022. Moreover, the top half highest yielding areas attracted 71 per cent of BTL landlords, up from 57 per cent ten years ago. 

“Recently, the buy-to-let market reached a record high of 8.7m homes. This puts the UK in fourth position in the world in terms of the size of its rental market.”