A prominent UK landlord has chosen to invest in loan notes offering a 10% return rather than purchase another buy-to-let property, citing diminished net yields and a mounting regulatory burden. The personal account, published on Property118, reveals how tax changes - including the restriction of mortgage interest relief and the additional 3% Stamp Duty on second homes - have prompted a rethink of traditional investment strategies. For this investor, the fixed return from property-backed lending now outweighs the benefits of direct rental ownership.
The shift from landlord to lender is becoming increasingly common. Lured by double-digit returns and the absence of the day-to-day management that rental properties demand, many former property investors are turning to peer-to-peer platforms and secured loan notes. Data from the Peer-to-Peer Finance Association indicates that property lending volumes passed £1.5 billion in 2023. The trend raises questions about the future of the private rented sector and the opportunities that may be left for those who remain.
What the rental data reveals
| District | Post town | Region | Homes owned |
|---|---|---|---|
| LS2 | Leeds | Yorkshire and The Humber | 11.1% |
| SR1 | Sunderland | North East | 11.9% |
| S1 | Sheffield | Yorkshire and The Humber | 13.3% |
| BD1 | Bradford | Yorkshire and The Humber | 13.5% |
| LE1 | Leicester | East Midlands | 14.8% |
| L1 | Liverpool | North West | 15.1% |
| HU1 | Hull | Yorkshire and The Humber | 16.1% |
| NE1 | Newcastle upon Tyne | North East | 16.1% |
| M50 | Salford | North West | 16.9% |
| EC1N | London | London | 17.2% |
Analysis of tenure data from the Postcodes UK database shows that the postcode district with the highest proportion of renting households remains LS2 in Leeds. Here, 11.1% of homes are rented, a figure that leads all other postcode districts in the country. The data, which aggregates private and social renting from the 2021 census, provides a granular look at where tenants are concentrated.
For landlords contemplating a retreat from the market, the LS2 statistic offers a nuanced picture. While 11.1% is the peak in England and Wales, it is still a relatively modest share of households, indicating that the district is not overwhelmingly dominated by renters. This could suggest that there is capacity for additional rental properties, particularly in undersupplied segments such as family homes or high-specification apartments.
However, the headline figure also points to a competitive landscape. LS2 encompasses Leeds city centre and the university quarter, meaning that purpose-built student accommodation and buy-to-let flats compete for the same pool of tenants. Investors attracted by the 11.1% renting rate should be aware that rental yields in central Leeds have compressed in recent years, and an oversupply of certain property types has led to longer void periods in some blocks.
Postcodes UK’s data reveals that nationally, no other district exceeds the 11.1% renting proportion found in LS2. That underlines the value of drilling down to postcode level when researching property investment. For those still committed to the buy-to-let market, such hyperlocal intelligence can highlight micro-markets where tenant demand is strongest - and where the returns may still beat the 10% offered by loan notes.
The data behind this
This article draws on three data sources: the HM Land Registry Price Paid Dataset, the ONS 2021 census, and the Postcodes UK database. Tenure statistics at postcode district level are compiled from census outputs and updated with Land Registry transactions to reflect tenure changes.
In response to reporting by Property118. Analysis and figures by Postcodes UK.