Young Investors Defy Trends in UK's Buy-to-Let Market Hotspots
Despite challenges in the UK's buy-to-let sector, some investors are expanding their portfolios in high-yield areas. New landlords are treating property investment as a business, adapting to regulatory changes.
The UK's buy-to-let market faces numerous challenges, yet some investors are bucking the trend by expanding their portfolios in specific high-yield areas. This shift comes as the sector grapples with high interest rates, reduced tax relief, and increased regulation.
Ryan Cresswell, a 28-year-old investor, exemplifies this new approach. Despite owning 13 properties in Darlington, he acquired four more in 2024 and seeks further opportunities. "I'm massively actively buying. I really want to grow my portfolio," Cresswell states, emphasizing his long-term commitment.
While buy-to-let purchases have reached a record low nationally, certain regions are experiencing growth. Middlesbrough leads with 40% of residential purchases going to landlords, followed by Derby (35%), Peterborough (33%), and Darlington and York (30%). These areas saw rent increases of 6% or more in July 2024 compared to the previous year, according to the Office for National Statistics.
Investors are attracted by high yields, with Middlesbrough and Darlington offering 9% returns compared to the UK average of 7.3%. Many new landlords are from outside these areas, drawn by better investment prospects.
The focus on yield-driven investments has intensified due to regulatory changes. In 2016, a three percentage point stamp duty surcharge was introduced on second homes and buy-to-let purchases. By 2021, mortgage interest tax relief was reduced to a flat rate of 20%. These measures, combined with stricter lending rules, have reshaped the market.
Neil Harding, who owns 27 rental properties primarily in Peterborough, acknowledges the impact of these changes. "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," he explains. Despite this, Harding continues to expand his portfolio, treating it as a business.
A new generation of landlords is emerging, often in their 20s and 30s, who approach buy-to-let investment with a business mindset. Many have taken courses on property investment and are well-versed in regulations and market dynamics. They often document their experiences on social media platforms like TikTok and Instagram.
"I studied the country's average rental yields before buying my properties"
This shift towards a more professional approach to buy-to-let investing reflects the changing landscape of the UK property market. As regulations evolve and market conditions fluctuate, successful investors are adapting by focusing on high-yield areas and treating their portfolios as businesses.
