Investors bought one in ten properties sold (13.9%) across the UK in the first three months of 2022, according to a new index.
Rental property landlords across the country bought 42,980 homes worth around £8.5 billion, according to the monthly Hamptons Index.
This is almost double the amount (£4.6 billion) recorded pre-COVID in the first three months of 2019.
Demand for real estate is increasing as investors seek out the most profitable areas of the country to maximize returns and hedge against inflation.
More than two-thirds (71%) of investors have bought in the country’s 50% most profitable regions so far this year, compared to just 57% ten years ago.
Read more: British property prices record strongest increase in six months
It is also one of the reasons why this year almost three quarters (73%) of London landlords bought their rental properties outside the capital, where yields tend to be higher, compared to less than a quarter (24%) ten years ago.
Due to rising costs of fuel, energy and food, the UK is experiencing its sharpest increase in 30 years. According to official figures, inflation was 6.2 percent in February.
Aneisha Beveridge, head of research at Hamptons, said: “Tax and regulatory changes have weighed heavily on the buy-to-let sector over the past five years, leading to more landlords selling at a time when there were fewer new entrants looking to buy. As a result, there are around 300,000 fewer privately rented homes in the UK today than at the sector’s peak in 2017.
“While we expect investors to continue buying at roughly the same rate throughout 2022, it is unlikely to be enough to offset the full loss of rental housing over the past five years.
“The shortage of rental housing is one of the reasons why rents have risen so sharply over the past year. March set a new record for rental growth as rents recovered from the 2021 lockdown lows last March.
Read more: The best ways to make money in real estate in 2022
“But as these new buy-to-let purchases spill over into the rental market in the coming months, we expect rental growth to slow, particularly as the cost of living crisis also puts pressure on affordability.”
The North East of England saw the biggest year-on-year increase in buy-to-let purchases: one in three (28%) of homes sold in the region were bought by investors, more than double the proportion of first-time buyers.
The region offers the highest gross yields in the country, averaging 9%, compared to 6.5% across England and Wales.
Middlesbrough tops the list of rental property hotspots – 58% of homes sold in the area in the last six months were bought by investors. With an average gross yield of 8.9%, it is the 13th highest yielding local authority in England and Wales.
While northern areas dominated the list of buy-to-let properties, six southern areas made it into the top 15, including London’s most affordable borough, Barking and Dagenham.
Last month, the average cost of a new rental in the UK rose to £1,115 per calendar month (pcm), up 9.1% from a low of £1,022 per month in March last year.
Rents in Inner London saw the strongest growth and continued to recover. Even with an average rent of £2,571 per month, up 21.3 percent year-on-year, the average apartment in Inner London costs £99, or 3.7 percent, less than in March 2019.
Outside London, the South West recorded the strongest rental growth at 14.9 percent.
