Buy-to-let lending in the Midlands and the north of England accounted for nearly half of all new purchases in the first half of the year, underlining a long-running shift in regional investment patterns.

Paragon Bank analysis of industry data found that the East and West Midlands, North West, North East and Yorkshire and the Humber made up 47.4% of mortgaged buy-to-let acquisitions in the six months to June. That is up from 46% in the same period last year and 33.5% a decade ago.

LANDLORDS FAVOUR HIGHER YIELDS

The bank said landlords had increasingly focused on regional markets where lower purchase prices reduce acquisition costs and boost rental yields. The trend gathered pace after the introduction of the Stamp Duty surcharge on additional homes in 2016.

The North West has now become the second-largest market for buy-to-let mortgaged purchases, representing 12.9% of acquisitions in the first half of the year. Yorkshire and the Humber also recorded its highest share at 9.5%, up from 9.2% a year earlier.

The North West sits just behind the South East, which accounted for 15.4% of transactions. It overtook London in 2019, with the capital contributing only 12% of new purchases in the latest figures.

SOUTHERN DECLINE

London and the South East together made up 27.6% of mortgaged buy-to-let purchases, down from a peak of 41.6% in the first half of 2015. The South West also saw a modest decline, falling to 6% from 6.2% a year earlier.

By contrast, activity in Wales and Scotland has remained broadly steady over the past decade. Wales accounted for 3.5% of new purchases compared with 3.2% in 2015, while Scotland made up 6.8%, up slightly from 6% ten years ago.

MARKET APPEAL

Louisa Sedgwick, Paragon Bank’s managing director of mortgages, said: “The trend towards investment across Midlands and northern markets increased following the introduction of the Stamp Duty surcharge nearly a decade ago.

“These markets are appealing to landlords for several reasons, including the availability of appropriate stock, strong tenant demand, healthy local economies, lower purchase costs and generally stronger yields.”

She added: “The South East and London are still the UK’s most important rental markets, however, given the transient nature of these markets and their economic importance. Stifled new supply against heightened tenant demand has driven rental inflation.

“Without an increase in new stock across the South East, and in particular London, tenant choice is diminished.”