Overview: a Generational Shift in Buy-to-Let Investment
Millennials are polarizing the buy-to-let market in England and Wales, now accounting for half of all new shareholders in buy-to-let companies formed this year. This marks a notable generational shift in landlords, even as the broader housing market remains tight and regulatory pressures persist. The finding comes from an analysis of Companies House data commissioned by Hamptons, the estate agency, and highlights how younger investors are shaping rental supply in a changing economy.
Why Millennials Are Investing Now
Despite ongoing affordability hurdles for many in the 34-to-43 age bracket, a cohort of millennials is stepping into buy-to-let despite higher stamp duties and evolving tax rules. Hamptons notes that millennial shareholders comprised 50% of new buy-to-let shareholders so far this year, up from 40% five years ago. Across all new shareholders, 75% are under 50, up from 68% a decade earlier. These figures point to a broader trend: younger investors are deploying capital into buy-to-let as a longer-term wealth and income strategy amid a sluggish housing market for first-time buyers.
Drivers Behind the Trend
- Regulatory and tax environment: Although tax rises and tighter regulations have pressured some landlords to exit, the level of new buy-to-let activity remains robust thanks to a new generation stepping in.
- Rising yields in the North: Investors are increasingly targeting northern regions where yields are higher and property prices are more accessible, aided by lower stamp duty costs.
- Portfolio transition among older generations: Baby boomers are more likely to wind down or pass portfolios to the next generation, creating onboarding opportunities for millennials and Gen Z.
Regional Shifts: From South to North
Investment patterns are broadening beyond traditional hot spots. In the third quarter, investor purchases were spread, with London, the south-east, south-west, and east of England accounting for 34% of investor activity—down from 50% in 2016. The North is gaining ground as a preferred region for buy-to-let, driven by higher yields and more affordable entry points. Notably, about 28.4% of homes sold in the north-east were bought by landlords, compared with only 8% in London. This geographic diversification suggests that the market’s rental supply is becoming more evenly distributed across the country, potentially easing rent pressures in some urban centers.
Rents: A Subtle Downshift in the New Let Market
The rental landscape in Britain shows a modest retreat. The average rent for a newly let home fell by 0.3% year-on-year to September, slipping by £4 to £1,398 per month. This is a marked slowdown from the previous year’s 4.2% growth and is largely driven by weakness in London, where rents declined by 2.7% month-to-month and 4.6% in inner London, bringing the average to £2,766 per month and about £165 below the October 2024 peak.
By contrast, rents on renewed contracts continued to rise, outpacing inflation with a 4.6% increase over the last 12 months. This divergence between new lets and renewals indicates landlords maintaining profitability through existing tenancies even as entry rents cool slightly. The shift may reflect a pullback in tenants seeking fresh shorter-term deals in a tighter market, while landlords with existing tenants retain higher renewal income.
Market Composition: Buy-to-Let as a Core UK Business
Buy-to-let operations have become a major pillar of the UK business landscape. This year, buy-to-let entities have emerged as the largest single business type in the UK, with activity nearly quadrupling compared with other service sectors like fast-food outlets or hairdressing chains. The data suggests a structural shift: as the boomer generation slows new portfolio formation, the market is increasingly driven by younger entrants who bring different capital and risk profiles to the sector.
Implications for Renters and Property Policy
For renters, the influx of millennial investors could mean more competition for desirable properties, potentially stabilizing rents in some markets but also concentrating supply in growth regions outside traditional hubs. For policymakers, the trend underscores the need for housing strategies that balance investor activity with tenant protections, ensuring that new investment translates into accessible, quality rental stock.
What Lies Ahead
With Hamptons predicting millennial landlords will form around 33,395 new buy-to-let companies this year, more than double the number from 2020, the generational shift appears set to continue. As the market evolves, expect ongoing regional rebalancing, continued cross-generation portfolio transitions, and a rental market that remains sensitive to economic conditions and regulatory changes.
