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Proportion of UK landlords buying in cash falls to lowest figure on record

LaToya Harding
·3 min read
A woman passes property signs, in west London. Photo: Toby Melville/Reuters
A woman passes property signs, in west London. Photo: Toby Melville/Reuters

The proportion of UK landlords purchasing houses in cash slumped 52% last year, the lowest figure on record.

According to Hamptons, cash landlords spent £11.7bn ($16.2bn) last year on new buy-to-let purchases, £1.5bn less than in 2019 and down from a peak of £19.8bn in 2015. This was boosted by interest rates falling to record lows.

It came as first-time buyers took advantage of the chancellor’s stamp duty holiday, meaning that just half of investor purchases were in cash during the second half of 2020, the research showed. The stamp duty holiday came into effect on 8 July and 2020 and ends on 31 March this year.

In 2017, some 62% of landlord purchases were in cash, a figure which fell to 60% in 2018, and 58% in 2019.

Landlords buying in Britain’s least expensive regions remained most likely to fund property purchases in cash during 2020. Almost two-thirds (65%) of buy-to-let purchases in Wales were in cash, followed by investors from the North West (64%) and the North East (61%).

The proportion of landlord cash purchases fell in 10 out of 11 regions in the UK between 2019 and 2020.

In contrast, investors in the most expensive regions of the country were most likely to rely on mortgage finance. Just 39% of London landlords and 45% of those in the South East paid cash for their buy-to-let last year.

Rental growth in London remained positive for the fourth straight month, rising 1% compared to January 2020. However, falling central London rents meant it was just 24% more expensive to rent in inner London than in outer London, down from 100% in 2013.

Watch: What do stamp duty cuts mean for buyers and house prices?

Aneisha Beveridge, head of research at Hamptons, said: “While investor purchases remain low compared with pre-2016 levels, the stamp duty holiday has tempted more small and first-time landlords back into buy-to-let, reversing a shift towards portfolio investors.

“Most of these new entrants are relying on a mortgage to fund their purchase, despite the changes to mortgage interest tax relief eating into the profitability of the sector for some.

“Since 2016 the rental sector has been buffeted by tax and regulatory changes, resulting in 250,000 fewer rental homes in England since the sector’s peak in 2017. But record-low interest rates on cash in the bank combined with the lure of a stamp duty holiday has enticed a new generation of investor, many of whom had no previous landlord experience.”

READ MORE: UK house prices fall as buyers struggle for time to beat stamp duty deadline

The property market has been allowed to continue to function during the latest national lockdown since the start of January, but industry figures say virus fears and restrictions are still limiting activity.

Many estate agents and surveyors said they expected the looming end to temporary stamp duty and land tax holidays across the UK to hit sales in months to come. Several said they expected current sales to be renegotiated but not fall through if they miss the deadline and buyers face higher tax bills.

Watch: How much money do I need to buy a house?