Landlords are selling out less than they used to but the rental sector has still severely shrunk as interest rate spikes, the slashing of landlord tax relief, and the long-term unaffordability of homes have put off would-be landlords.

According to data from estate agency Hamptons, there will be nearly 300,000 fewer rental properties by the end of this year compared with the start of 2016. However, the data showed that net sales, which strip out landlords buying up, peaked last year and the exodus could be slowing. Hamptons data suggests there will be 27,500 net sales this year, down from 47,250 last year, and even lower than the 29,500 in 2021.

Landlord purchases have still fallen this year and now account for the lowest share of overall buys since Hamptons started recording the numbers in 2010. Investors accounted for just 11.2 per cent of house purchases this year.

Landlord-buying activity peaked in 2015, accounting for 15.7 per cent of all homes bought. The following year, the number dropped to 2.5 percentage points in the biggest year-on-year swing recorded in the data. Hamptons pinned this on the government’s cuts to landlord tax relief, which were announced in 2016 and became effective in 2017.

David Fell, senior analyst at Hamptons, said the combination of those tax changes, high interest rates, and young people’s inability to buy homes have created an all-time low in landlord house acquisitions this year. “A lot of the landlords in the market bought [their investments] 20 or 30 years ago, and they haven’t been followed by Millennials or Generation X,” he said.

According to the data, for every year leading up to 2016, more landlords bought properties than sold them. Every year since, more have sold. Though some have suggested that landlords selling up is to blame for the record pace of UK rental growth, Hamptons data shows the dropoff in buyers has been more acute than the increase in sellers. Fell said this is the “primary reason” for the net shrinkage of the sector and record rental growth.

Fell said Vistry (VTY) pivoting its entire business towards building homes according to bulk purchases from institutional investors and listed landlords like PRS Reit (PRSR) that will rent them out is a reaction to the net fall in BTL supply. Other housebuilders, such as Springfield (SPR), have recently made similar deals along these strategic lines. The Hamptons data does not reflect these housebuilder bulk deals, but Fell said he did not think they would offset the overall slump in landlord purchases.

The numbers also revealed how BTL transactions vary across the UK. In Scotland and London, landlords accounted for a mere 6 per cent and 9 per cent of purchases, respectively. Meanwhile, in the East Midlands and North East England, they accounted for 17 per cent and 27 per cent of deals. Fell said this showed how BTL landlords were chasing higher yields by buying in locations where house prices are lower.