But rate of increase continues to decelerate
The average rent for newly let properties in Great Britain reached a record high of £1,384 per month in September, but the pace of growth continued to slow, according to the latest Hamptons Monthly Lettings Index.
Year-on-year, rents increased by 4.5%, down from 5% in August and significantly lower than the 11.7% rise recorded in September 2023.
September 2024 also marked the first month since March 2021 in which no region saw a double-digit percentage increase in rent. In contrast, six of 11 regions had posted annual growth rates of 10% or more in September 2023. The North East, the only region to record double-digit growth in August with a 12.1% rise, saw that figure fall to 8.1% in September.
London tenants experienced the smallest rent increases in percentage terms. Rental growth in Greater London slowed from a peak of 17.2% in August 2023 to 2.1% in both August and September 2024. Despite this slowdown, rents in London remain high in cash terms, with the average rent in Inner London reaching £3,284 per month in September, £1,099 higher than three years ago.
Meanwhile, buy-to-let activity also surged, with 5,312 new limited companies set up in September to hold buy-to-let properties across Great Britain. This represents a 28% increase from the previous record set in September 2023, and the third-highest monthly figure on record. In total, 46,449 companies were set up between January and September 2024, a 23% rise from the same period last year.
The rise in incorporations is driven by tax advantages for buy-to-let properties held in company structures. Landlords can no longer fully claim mortgage interest as a deductible cost if the property is held in their personal name, prompting many to move properties into limited companies. Properties sold by companies are also exempt from Capital Gains Tax, further incentivising this shift.
By the end of 2024, it is expected that between 60,000 and 62,000 buy-to-let companies will be established, surpassing last year’s total of 50,004.
Nearly 60% of new companies have been set up in southern England, where higher interest rates and a larger share of higher-rate taxpayers have made incorporating more attractive. However, only 42% of the properties bought by these companies are in the South, with many landlords investing in the Midlands and the North, where rental yields are higher.
As of September 2024, there are 382,007 companies across Great Britain holding rental properties, with 74% of these established since 2016, when tax rules changed. Around 70% of new buy-to-let purchases in England and Wales in 2024 were made through limited companies.
The total number of properties held within company structures across England and Wales has grown by 175% over the past decade, reaching 666,831. Despite this growth, only about 15% of all privately owned rental homes are held within a limited company.
Smaller landlords, those making their first, second, or third purchase, account for 54% of new company purchases this year, a significant shift from prior to 2016 when company ownership was more common among larger landlords.
“While landlord purchase numbers are well down on pre-pandemic levels, there’s been no slowdown in the number of companies being set up to hold these properties,” said Aneisha Beveridge (pictured), head of research at Hamptons. “Most new purchases are now made through a company structure.
“While the ability to offset mortgage payments before being taxed has driven many new incorporations, recent speculation about potential increases in Capital Gains Tax or Inheritance Tax is also contributing to the rise. Higher personal tax rates will further increase the divide between landlords holding properties in personal names versus company structures.”
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