Wednesday 19 July 2017

Monthly Lettings Index – June 2017

Proportion of overseas landlord's halves

  • In 2017 overseas based landlords own 5% of all homes let in Great Britain, down from 12% in 2010 (table 1)
  • London has seen the biggest fall in the proportion of homes owned by overseas landlords, from 26% in 2010 to 11% in 2017
  • Landlords based in Asia took over the Europeans as the largest group of overseas landlords in London in 2014
  • Rents rose 1.1% year-on-year across Great Britain in June to stand at £950 pcm (table 4)

Countrywide’s Monthly Letting Index published today, shows that the proportion of overseas based landlords in Great Britain hit a record low in 2017.  Overseas landlords owned 5% of all homes let in Great Britain in 2017, down from 12% in 2010 (table 1).  London has seen the largest fall with one in ten (11%) homes let this year owned by an overseas landlord, down from one in four (26%) in 2010.  In prime central London overseas based landlords owned nearly a third of all homes (31%) let in 2010, a figure which has fallen to 23% in 2017.

The number of European based landlords has been gradually falling over time, more so than any other nationality. In 2010 they made up 39% of all overseas landlords in London, but now account for 28%.  They were the biggest group of overseas investors in London until 2014.  Asia based landlords are now the biggest group of all overseas based landlords in the capital (33%), followed by Europeans (28%), North Americans (10%) and Middle Eastern (9%).  Outside of London, Europeans (37%) remain the biggest group of overseas landlords (table 3). 

The proportion of overseas based landlords has fallen in every region across Great Britain since 2010.  London has always had the highest proportion (currently 11%) of landlords based overseas, followed by the South East (5%) (table 2).  Outside London and the South East, less than 5% of homes are let by an overseas landlord. Scotland, Wales and the Midlands have the lowest (3%) (table 2).  

The average overseas based landlord earn't 35% more in rent last year than one living in the UK.  They earn't £5.4billion in rent over the last 12 months, 11% of the £50.6billion paid by private tenants in Great Britain.  Over half the income earn't by overseas landlords came from rental homes in London.  

According to our new index methodology* the average price of a new let in Great Britain rose by 1.1% year-on-year in June 2017 to stand at £950 pcm. London was the only region to see rents fall year-on-year (-0.8%).  The South West recorded the strongest rental growth of 4.6%, the biggest year-on-year pickup since November 2015 (table 4).

Commenting on the findings, Johnny Morris, Research Director at Countrywide, said:

“The growth of the private rented sector since 2010 has not been driven by overseas investors.  A steady increase in foreign investors’ tax bills combined with more recent falling expectations of price growth in London has led to a decline in foreign investment in buy-to-let.

As well as having to contend with increased stamp duty and the annual tax on enveloped dwellings (ATED), overseas investors also saw the removal of capital gains tax exemptions in 2015.

Rental growth remained at 1.1% in June.  Falls in London were off-set by higher growth across the rest of the country.  The fall in the capital was driven by lower rents in the outer areas of London as the ripple effect from falling rents in Central London continues.”

About the Countrywide Lettings Index and new methodology

The Countrywide Lettings Index has been running since 2012 and we continually seek to improve its accuracy.  From this month the methodology has been changed to reduce the impact of seasonality and volatility in the rental market. 

While the index remains a mix adjusted series, rent and rental growth figures for each month are now based on a three month rolling average rather than lets agreed in the last month.  The most expensive decile of homes let has been excluded to reduce volatility and the mix has been updated to include the most recently published government stock statistics.

The Countrywide Lettings Index uses data from Great Britain's largest letting agent to track changes to the cost of renting.  The index is based on the 90,000 homes let and managed by Countrywide in each year, adjusting for their location and type.  It is based on achieved rather than advertised rents and the published monthly rental figures are an average of the new lets and renewals of tenancies over a rolling three month period.