Since April 2016 landlords purchased 700,100 homes across Great Britain, 249,800 or 26% fewer than if the 3% surcharge and tapering of mortgage interest relief had not been introduced, according to Hamptons.
Fewer landlord purchases have meant there were 4.91 million privately rented homes in Great Britain in 20/21 accounting for 17.5% of households, down 381,990 on the sectors peak in 16/17.
Had these tax changes not been introduced Hamptons believes there would have been 5.16 million rented homes in Great Britain today making up 18.4% of households.
In 2015 landlords purchased 16% of homes in Great Britain, but by 2018 this figure fell to a low of 11%.
Over the last year the lure of a stamp duty holiday in England has seen landlord purchases pick up marginally, to 13% of sales.
However, 72% of all rental homes in Great Britain today were bought before April 2016.
Southern regions, where properties are more expensive, have been hit hardest by the tax changes.
In London, the share of homes bought by landlords fell from a high of 20% in 2015 to 11% during Q1 2021.
As a result, landlords have purchased 61,300 homes in London since 2016.
Although this number would have risen to 103,300 or 69% more homes had the tax changes not been introduced, Hamptons believes.
This drop-off in new investment means 81% of all rental homes in the capital today were bought before April 2016, compared to just 65% in the North West where landlord purchases have remained more resilient.
Higher yields and lower entry costs mean just 14% or 14,800 more homes would have been bought by investors in the North West without the tax changes.
Across Great Britain rents rose 5.9% annually in April, the fastest rate since January 2015.
Growth remains driven by regions beyond the capital, with rents outside London up 10.4% on the same time in 2020.
This is the first time since the index began in 2012 that average growth rates outside of London have hit double digits, partly driven by the drop in rents in April 2020, down 2.2%.
In comparison, over the last 24 months, rents rose 8.0% outside London.
The South West saw faster rental growth than anywhere else in the country, with prices up 11.3% on the same time last year.
Rental growth in the South East also surpassed 10% last month.
Despite this, rental growth remains linked to an unprecedented fall in the number of rental homes on the market, according to Hamptons.
There were 45% fewer homes available to let in April 2021 than in April 2019, with half of regions recording falls of 50% or more.
As with rental growth, the South West topped the stock shortage league with 62% fewer homes to rent than at the same time in 2019.
London recorded the smallest fall of 20%. Rental stock in cities was down 24% over the same period, while in country locations it fell by 65%.
Aneisha Beveridge, head of research at Hamptons, said: “The tax changes introduced from 2016 onwards have undoubtedly taken the heat out of the buy-to-let market.
“Landlord purchases have dropped and consequently the rental sector is 7% smaller than it was at its peak in 2017.
“Even without the tax changes, we still think the rental sector would be slightly smaller today than it was in 2017.
“Growth in the sector was slowing in the lead up to 2015 and the lure of government support measures such as Help to Buy and the removal of stamp duty have seen more first-time buyers (would-be tenants) become homeowners.
“But the longer-term impact of fewer rental homes is driving rental growth now, with rents rising six times faster than inflation.
“Tenants face half the choice they had two years ago and each new instruction has brought a deluge of enquiries within hours of homes going onto the market.
“While the current stamp duty holiday has boosted investor purchases a little, we are yet to see these flow into new instructions and improve choice for tenants.”