Landlords have earned £22 for every £1 invested in the 30 years since the UK’s first buy-to-let mortgage launched.

Hamptons used ONS house price and rental growth data to work out that for every £1 invested in the average UK buy-to-let property in late 1996, it had generated £22.30 in capital growth and net rental income after running costs by 2026, representing a total return of 2,130% over the period.

Nearly two-thirds (62%) of total returns have come from rents paid by tenants, while the remaining 38% was from rising property prices.

Both property and US equities have delivered nearly three times the total returns generated by the FTSE 100 (£8.96 per £1 / 796%) and Gold (£7.36 per £1 / 636%) over the same 30-year timeframe.

Hamptons explains that in 1996, the first wave of landlords largely comprised of homeowning Baby Boomers in their 30s and early 40s looking to build long-term wealth through property ownership. Average house prices stood at just £54,900, while mortgage rates averaged 7.76%. Despite the relatively high cost of borrowing, most landlords (88%) opted for repayment mortgages, steadily reducing their debt while benefiting from the rapid house price growth that followed which helped many build equity and expand their portfolios.

Average

Today’s average investor is a 51-year-old professional navigating higher prices and taxes, and slower price growth, while prioritising monthly cash flow.

The average buy-to-let purchase now costs £360,600 and seven in 10 mortgaged buy-to-let purchases are now interest-only, while fixed-rate mortgages now account for 99% of all buy-to-let lending compared to just 26% in 1996.

Equity

Aneisha Beveridge, head of research at Hamptons, says today’s largest portfolios often started off life in the late 1990s and have accrued substantial equity through successive house price booms, creating equity which has often been reinvested. “For a growing number of landlords, those properties are now part of a wider family business that is likely to be passed down to the next generation rather than being sold off in the face of rising tax rates,” she adds.

However, landlords would get much higher returns by investing in typical stock market portfolios than residential property, according to research by wealth and asset management firm Rathbones. Earlier this summer it said that during the past year, UK house price growth had risen just 1.7% - only half the pace of inflation - while a simple investment mix of 25% UK equities and 75% international equities increased by 11.8% before dividends.

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