For many buy-to-let investors, now is the time to be running for the exit. The odds are stacked against them: interest rates remain high, tax relief has been cut, the paperwork is arduous, and more regulation is set to be introduced by the Labour Government.
But for Ryan Cresswell, this has been one of his busiest years.
The 28-year-old buy-to-let investor has bought four properties so far in 2024 and is on the lookout for more deals. “I’m massively actively buying. I really want to grow my portfolio,” says the landlord, who owns 13 properties across Darlington. “I’m in this for the long haul.”
Cresswell is one of a number of landlords across the UK who are bucking the trend of investors exiting the buy-to-let sector and choosing to expand their rental portfolio in areas where there is still a decent rate of return on their investment.
Despite purchases of buy-to-let properties falling to a record low this year, according to research from the estate agency chain Hamptons, there are still pockets of England and Wales where demand for rental purchases is growing.
Middlesbrough is the top buy-to-let hotspot so far this year, with 40pc of all residential purchases going to landlords, followed by Derby at 35pc, Peterborough at 33pc, and Darlington and York at 30pc. All five of these areas recorded rent rises of 6pc or more in July 2024 compared to last year, according to the Office for National Statistics.
Landlords here are being lured by consistently high yields – the annual return on a property investment – which are 9pc in Middlesbrough and nearby Darlington, compared with the UK average of 7.3pc. In fact, across the UK, yields are actually rising overall for new investors, due to strong rental growth combined with stagnant property prices.
Many of the new landlords in these hotspots are not from the area, but have decided to invest there due to the better returns they can get for their money. “The property lettings market has gone crazy,” says Ben Quaintrell, of the Darlington-based estate agency My Property Box. “I would say around 35pc of the buyers are from out of the area and coming from different parts of the country.”
Cresswell bought his first property in Darlington in 2021 at the age of 24, despite living in Salisbury at the time. “I was looking at a map of England with average prices and yields for rental properties. Even though the North East was on the other side of the country, it was the best on what sort of return I could get,” he says.
“There was also a lot of regeneration going on in that area, and I already knew a few people who were buying investment properties in the North East, so I was capable of building connections there.”
The changing appetite of investors in London is a key example of how demand has shifted since the crackdown on buy-to-let. In 2014, 62pc of London-based investors bought their buy-to-let properties in the capital; 10 years later this has shrunk to 32pc, according to Hamptons.
“What we’ve seen over the past couple of years with tax changes for landlords and mortgage rates going up is that investors have had to become a lot more yield-focused,” says Aneisha Beveridge, of the estate agent.
“If you’re not buying a home where you get a pretty good yield return, and where your rental income is quite high relative to your mortgage payment, you’re probably not making any money.
“That’s why a lot of the places on this list tend to be the more affordable areas in the country where yields are higher, and that’s where investors are doubling down on.”
Estate agents say that buy-to-lets are now much more likely to be snapped up by investors treating it as a business, rather than amateur landlords who have felt the impact of rising regulation the hardest. In a bid to dampen demand in the buy-to-let sector, then-chancellor George Osborne announced that mortgage interest tax relief would be tapered down to a flat rate of 20pc by 2021.
This meant landlords could no longer deduct interest payments as a cost before working out their profit, and was a particularly worse deal for higher and additional-rate taxpayers, who risked paying tax even when they made a loss on their rental properties. Most landlords now set up a limited company to buy properties rather than doing so in their own name, as this still allows for tax relief on mortgage interest.
The Government also issued a three percentage point stamp duty surcharge on second homes and buy-to-let purchases from 2016, while the Bank of England tightened lending rules for buy-to-let investors. At the same time, paperwork has grown, with over 170 pieces of legislation that landlords need to adhere to.
Neil Harding owns 27 rental properties, the bulk of which are in Peterborough, where he was born and grew up. Harding, who now lives in Cambridge, says the lack of tax relief and higher mortgage costs has been “a double whammy that for a lot of people was a strong motivator to get out of the game altogether”.
Harding owns 10 flats and 17 houses, all of which are single lets, and are on interest-only mortgages. “I’m still expanding and growing the portfolio,” he says.
“I put myself in front of opportunities as much as I can, so that where and when I see them, I’m well positioned to invest. I have bought four properties in one day before, but I’ve also gone the best part of a year without buying anything.”
Harding, 47, retired from his previous career as a chartered accountant in 2022 to focus on letting his properties and to chart his progress on his YouTube channel Property Insight, which he runs with a fellow investor. Harding has found he is now better placed to spend more time with his wife and two children.
“I think for people who aren’t running these properties like a business, trying to keep up to date with all of the regulation, reforms and rules of letting a home is extremely challenging,” he adds. “But if you’re going to scale it and run a business, then it can make sense. I’m not against the increased regulation at all. I see it mostly as a positive thing.”
Cresswell took the onerous rules affecting buy-to-let in his stride – as he never knew any different. “The blessing for young people like myself is we came into the market with this regulation. It was normal for us,” he says.
“For example, I never thought of buying properties in my own name and knew I had to set up a limited company. I think regulation is a good thing.”
Quaintrell says many of the younger landlords he sees buying homes in Darlington have taken courses on how to be a buy-to-let investor, making them more savvy about the process.
“I would describe a new breed of landlords that has been educated in the ways,” says Qaintrell. “They’re averaging in their 30s but you’ll get a few in their 20s. They’ve often done property education courses where they’re taught all about return on investment and yields, and how to find good properties, and whether the capital value can be added and so on.
“So they’ve spent the money on education costs, set up limited companies properly, and they’re really revved up. They’ve all got these super Instagram pages where they show a property they’ve bought that was a wreck and then flipped it, or where they’ve bought in a brand new kitchen or whatever.”
Cresswell is no exception to this trend and documents his life as a buy-to-let investor on TikTok and Instagram, detailing the lessons he learns along the way. “I would love to help more people get this,” he says.