Recent research carried out by UK estate agent Hamptons International reveals that nearly three in five (59%) London-based landlords purchased their buy-to-let property outside the capital during the last 12 months.
London landlords would historically purchase investment properties near where they lived. In 2010 just 1 in 4 (25%) London-based landlords purchased their buy-to-let outside the capital, with 75% investing in London. However this is now changing with many London landlords now opting to purchase outside of the capital.
One of the main reasons for this is the increase in landlord taxation. It has now been 3 years since the introduction of the stamp duty surcharge for second homeowners, this additional tax has meant that a landlord buying in London during the last 12 months faced a £24,600 stamp duty bill on average, compared to £5,330 for an investor buying outside the capital.
An average stamp duty bill for an investor buying in London is now £11,760 more compared to pre-stamp duty changes (Q1 2016), but only £3,910 higher for an investor purchasing outside London.
As a result of bigger stamp duty taxes and an increase in property prices, a record proportion of London property investors have headed North to purchase buy-to-lets. 34% of London-based investors bought buy-to-lets in the Midlands and North during the last 12 months, up from just 14% in 2015 and 4% in 2010 (Table 1). The East Midlands and Yorkshire & Humber saw the greatest increase following the stamp duty surcharge introduction, with 6% more London landlords buying investment properties in those regions than in 2015.
The South East remains the most popular destination for London-based landlords purchasing buy-to-lets outside the capital. 11% of London-based landlords purchased their buy-to-lets in the South East over the last 12 months, 2% fewer than in 2015 (Table 1). Dartford is the most popular destination for London-based landlords in the South East. Landlords living in London bought 60% of buy-to-lets in Dartford during the last 12 months.
Commenting Aneisha Beveridge, Head of Research at Hamptons International, said:
“April marks the three year anniversary of the stamp duty surcharge introduction for second homeowners. Following the tax hike, landlords have been adapting their strategy to find new ways to make their returns. Lower entry costs and higher yields outside of the capital are enticing investors to look further afield than they have previously.
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