The chancellor’s recent decision to increase the surcharge on second-home purchases from 3% to 5% appears to be pushing landlords towards properties in the north of England, where lower purchase prices mean lower stamp duty increases.
According to Hamptons, a growing share of buy-to-let (BTL) purchases in the North derives from investors who live in the south of England.
Are we seeing a concerted shift towards the North? Marchwood IFA mortgage adviser and director James Gordon (based in Chichester) certainly thinks so.
This trend remains part of a long-standing pattern rather than a sudden spike following recent tax changes
“Buy-to-let enquiries are on the increase, albeit from a very low base.
“Any that we do get are looking at property in Birmingham and Manchester predominantly, for better yields (which has always been the case in the North, of course) but mainly the implications of stamp duty.”
Gordon adds: “I couldn’t tell you the last time I had a client contact me with a view to buying a BTL in London or the generic South.”
Connect Mortgages chief executive Liz Syms agrees that the Labour government’s decision to increase the stamp duty land tax (SDLT) for additional properties is prompting investors to explore opportunities outside the capital and the Southeast.
She outlines how the increased surcharge makes purchasing additional properties more costly; for instance, acquiring a second property valued at £500,000 now incurs an additional £25,000 in SDLT surcharge, up from the previous £15,000.
We shouldn’t be surprised to see landlords explore every possible opportunity as they continue to respond to market challenges and the policies of successive ‘anti-landlord’ governments
“In response to these increased costs, there’s a noticeable trend of investors from the south of England turning their attention to the North,” says Syms.
“The North offers several advantages, such as lower property prices, reducing the SDLT cost, and higher rental yields.”
She adds: “Regions such as the Northeast boast some of the UK’s highest rental yields, with certain areas achieving returns up to 15.4%.
“In addition, cities such as Manchester, Leeds and Liverpool have experienced significant house-price growth, enhancing capital appreciation prospects.”
This evident shift towards the North is also highlighted by Paragon Bank managing director of mortgages Louisa Sedgwick.
“In 2014, London and the Southeast accounted for 46% of buy-to-let purchases,” she says. “That proportion fell to 32% last year, while the Northeast, Northwest and Yorkshire & Humber collectively saw their share of the market increase from 22% to 35%.
For many investors, the appeal of northern markets lies not just in lower purchase prices but in the potential for diversification
“Our data between 2014 and 2024 suggests that the typically higher prices paid for homes in the South naturally come with substantially higher upfront costs, highlighting how the tax can be a deterrent to buying much-needed rental properties.”
Black & White Bridging director of lending Oli Bland accepts that the tax changes will have an impact on where landlords invest but says this is only nudging a trend that has momentum already.
“Over the past decade, we’ve seen a steady migration of buy-to-let investors looking northwards, driven by more accessible property prices and stronger yields compared to those in the South and especially the Southeast.
“This trend has accelerated in recent years but remains part of a long-standing pattern rather than a sudden spike following recent tax changes.”
Bland adds that, although the increase in the SDLT surcharge on second-home purchases has undoubtedly added pressure, in isolation it is unlikely to cause a major shift in landlord behaviour.
Buy-to-let enquiries are on the increase, albeit from a very low base
“The UK’s persistent supply-and-demand imbalance continues to overshadow the impact of these policy changes,” he says.
“For many investors, the appeal of northern markets lies not just in lower purchase prices but in the potential for diversification, whether through student accommodation, HMOs [houses in multiple occupation] or other models that can deliver stronger returns.”
However, Bland is keen to reiterate that BTL activity is declining overall, with landlords facing mounting disincentives across the board.
“Many are choosing to sell their portfolio rather than reinvest and, while some southern-based investors are venturing north, the fundamental challenges in the market — affordability, tax burdens and mounting regulatory pressures — mean we’re unlikely to see a significant uptick in activity anytime soon.”
Just Mortgages and Spicerhaart CEO John Phillips agrees that landlords are looking further afield — out of necessity.
“We shouldn’t be surprised to see landlords explore every possible opportunity as they continue to respond to market challenges and the policies of successive ‘anti-landlord’ governments. For those still looking to expand their portfolio, we are likely to see them moving into the North, as well as those pockets where house prices have faced more pressure compared to the national average.”
I couldn’t tell you the last time I had a client contact me with a view to buying a BTL in London or the generic South
Phillips adds: “Given the challenges facing high streets up and down the country, we may even see more landlords look to convert commercial premises into rentals or HMOs.”
As with all businesses looking to stay profitable and viable in the long term, landlords are logically weighing up all the options in what is an incredibly testing market.
The reality is they are migrating to where value is to be had, and not to all points where BTL investment is needed to lessen supply pressures.
This article featured in the February 2025 edition of Mortgage Strategy.
If you would like to subscribe to the monthly print or digital magazine, please click here.
