Buy-to-let businesses have already grown into the biggest private rental sector in operation in Britain. This trend marks a broader shift in the nature of property investment. This year, millennials account for half of all new shareholders in buy-to-let companies. That’s a big turnaround from 2020, when landlords made up just 40% of buy-to-let investors. This generational shift is part of a larger societal trend, especially as younger people are more likely to experience barriers to homeownership than their elders.
In a matter of years, these buy-to-let small businesses have multiplied in ranks. This makes them almost four times as common as fast-food takeaways or hairdressers across the entire UK. Rental income is extremely sexy. With millennials increasingly struggling to enter the housing market, a growing number of young professionals are finding their feet in property investment.
Investors have been coming out in droves to see these transformational projects taking place across the northern parts of England. There, lower property prices mean lower stamp duty costs, attracting more buyers. As such, the higher rental yields available in these areas are becoming attractive options for investors looking to maximize their returns. In the north-east, for instance, a full 28.4% of houses sold were bought by landlords while an average of just 8% of homes in London were. This gap underscores the larger trend of investors increasingly looking for better returns beyond the capital’s borders.
Year on year, the average rent for newly let homes across Britain, including London, has fallen marginally by 0.3%, to £1,398 in the year to September. What landlords are currently experiencing is continued upward pressure on rents on contracts that are up for renewal. Rents on new leases surged an astonishing 4.6% the past 12 months. This increase far surpassed inflation and is indicative of a booming rental market. This dynamic allows new investors to benefit from ongoing demand while navigating a fluctuating market.
That makes policy changes a savior, or at least influencers, in the buy-to-let sphere. As of April, landlords are now subject to a 5% stamp duty surcharge, up from the previous 3%. This change has caused many investors to re-assess their business models and start thinking about the longer-term impact on their bottom line.
The general market is slowing overall – particularly in London, where average monthly rents have fallen by 2.7% or £65. Yet the buy-to-let sector is still booming. Landlords accounted for 11.3% of property purchases in the third quarter, indicating sustained interest in property investment despite market fluctuations.
Millennials are on course to start an additional 33,395 new buy-to-let companies this year. One third of them are a hoax—their impact on the property market is enormous! This is a perfect illustration of a broader trend that shows how younger generations are prioritizing their investments. They are reacting to a fast-changing competitive housing market.