44 per cent of landlords are looking to expand their portfolios before July 2018, despite the majority being affected by changes to income tax liability.
The latest Property Investor Survey from Mortgages for Business looked into landlords’ spending agenda. It asked landlords what types of property they were looking to buy as part of their expansion strategy. 75 per cent of landlords claimed that ‘vanilla’ buy to let properties were likely to form part of the mix. HMOs were also a preferred option, likely due to the fact that they offer the highest yields.
However, a minor increase was noted in the number of landlords who said that they intended to reduce the size of their portfolio in the next six months as a direct result of the tax changes. Interestingly, 41 per cent said that they would not act as a result of the changes to income tax liability, suggesting an element of ‘wait and see’ in the buy to let market.
For those who are committed to expanding their portfolios, limited companies as borrowing vehicles remain popular. 58 per cent are taking this route, with a further 20 per cent claiming to be purchasing both personally and via a corporate structure.
48 per cent said that that they had not been affected by either the new affordability calculations or the specialist underwriting approach which were introduced by lenders last year in response to guidelines issued by the Prudential Regulation Authority. This may be due to the fact that some landlords have not yet applied for finance since the onset of the new guidance.
COO at Mortgages for Business, Steve Olejnik, said: ‘The results show that many landlords are more optimistic about the future of property investment than some commentators would have you believe. Of course, there will be some who will choose to leave the sector but this will create opportunities for those who are in it for the long term.’
He added: ‘What’s really happening is the market is getting far more specialised. Portfolio landlords are coming to the fore, as fewer people are getting into buy to let as an alternative pension strategy. The role of the broker will grow as lenders increasingly rely on them to help landlords understand the changing environment and prepare the paperwork that is now required when applying for a mortgage.’