Higher taxes deter overseas based buy-to-let investors

The proportion of let properties in the UK that are owned by overseas landlords has dropped dramatically, according to new figures.

The proportion of homes let by an international landlord in Great Britain has halved from 13% in the first half of 2010 to 6% in H1 2018, according to Hamptons International’s latest lettings index.

The data reveals that over the last 12 months, the proportion of homes let by an international landlord has fallen a further 2%, a record low across Great Britain.

But despite the sharp decline in investment by overseas purchasers, London has actually seen a pickup in international based landlords this year. 

The proportion of London homes let by an overseas landlord peaked at 20% in H2 2011, but fell back to 7% in H2 2017 – the lowest point on record. 

However, unlike the GB average, London saw a 5% increase in the proportion of homes let by an overseas landlord between H2 2017 and H1 2018.

Aneisha Beveridge, an analyst at Hamptons International, commented: “The proportion of homes let by an overseas based investor has halved in the last eight years. 

“Higher stamp duty and annual tax on enveloped dwellings (ATED) combined with a steady increase in foreign investors’ tax bills has led to a decline in foreign investment in buy-to-let.  Overseas investors also saw the removal of capital gains tax exemptions in 2015.

“However over the last year, London has bucked the trend with a pickup in international landlords. Sterling’s depreciation, effectively offering international buyers a discount, combined with a softening London market, has helped offset the additional higher costs of owning a buy-to-let property in the capital for foreign investors.”

Proportion of homes let by an international landlord

Source: Hamptons International

Some 12% of London homes were owned by an overseas based landlord in the first half of this year, up 5% compared with the second half of last year.

However, the proportion of properties owned by international landlords’ remains down from a peak of one in five - 20% - recorded the in H2 2011.

Proportion of homes let by an overseas based landlord by region

Source: Hamptons International

Almost half of international landlords are based in Western Europe (44%).  Landlords from Australasia (16%), North America (14%) and Asia (12%) make up the next biggest groups. 

Middle Eastern landlords account for 9% of homes let by international landlords in Great Britain.

But in London, 30% of international landlords are based in Western Europe followed by 20% from Asia.

Where overseas landlords are based (last 12 months)

Source: Hamptons International

The average cost of a new let in Great Britain rose to £964 pcm in July, up 0.2% month-on-month.

Wales saw the highest rental growth with rents up 4.9% year-on-year, followed by the Midlands (2.4%) and the South West and North both recording a 0.9% rise.

Meanwhile average rents in London fell for the second consecutive month, down 1.6% year-on-year.

Beveridge said: “Rental growth slowed to 0.2% across Great Britain in July. Falls in London were offset by higher growth in the rest of the country.

“Inner London experienced the greatest fall, with rents decreasing for the third consecutive month.”

New lets (pcm)

Source: Hamptons International

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