Investors purchased one in every 10 properties (13.9%) sold across Great Britain in the first three months of 2022, according to a new index.
Buy-to-let landlords bought 42,980 homes across the country, around £8.5bn worth of property, the Hamptons monthly index shows.
That is almost twice the figure (£4.6bn) recorded pre-COVID in the first three months of 2019.
Appetite in property is on the rise as investors look to the highest yielding areas of the country as a way to maximise their returns and hedge against inflation.
So far this year, over two-thirds (71%) of investors bought in the 50% of highest yielding areas of the country, up from 57% a decade ago.
It is also one of the reasons why nearly three quarters (73%) of London-based landlords bought their buy-to-lets outside the capital this year, where yields tend to be higher, up from less than a quarter (24%) a decade ago.
UK inflation is rising at its fastest rate for 30 years as fuel, energy and food costs surge. Inflation reached 6.2% in February according to official figures.
Aneisha Beveridge, head of research at Hamptons, said: “Tax and regulatory changes have weighed heavily on the buy-to-let sector over the last five years causing more landlords to sell up at a time when fewer new entrants were looking to buy. As a result, there are around 300,000 fewer privately rented homes in Great Britain today than at the peak of the sector in 2017.
"While we expect investors to continue purchasing at around the same rate over the course of 2022, it’s unlikely to be enough to make up for the full loss of rental homes during the last five years.
“A lack of rental homes is one of the reasons why rents have been rising at such pace over the last year. March set a new record for rental growth as rents bounced back from 2021 lockdown lows last March.
"But as these new buy-to-let purchases begin to feed into the lettings market over the coming months, we expect to see rental growth cool, particularly as the cost of living crisis weighs on affordability too.”
The north east of England saw the biggest year-on-year increase in buy-to-let purchases, with investors buying one out of every three (28%) of homes sold in the region, more than twice the share bought by first-time buyers.
The region offers the highest gross yields in the country, averaging 9% compared to 6.5% across England & Wales.
Middlesbrough topped the local authority list of buy-to-let hotspots — 58% of homes sold in the area over the last six months were purchased by an investor. With an average gross yield of 8.9%, it’s the 13th highest yielding local authority in England and Wales.
While Northern areas dominated the buy-to-let purchase list, six southern areas made it into the top 15, including London’s most affordable borough, Barking and Dagenham.
Last month, the average cost of a new let in Great Britain rose to £1,115 per calendar month (pcm), up 9.1% from its 2021 low of £1,022 pcm in March last year.
Rents in inner London saw the strongest growth as they continued their recovery. Even at an average of £2,571 pcm, up 21.3% year-on-year, the average home in inner London costs £99 or 3.7% less than it did in March 2019.
Outside London, the south west recorded the strongest rental growth, at 14.9%.