Following the introduction of what some would describe as punitive taxes designed to “cool-down” a booming buy-to-let lending market, and despite the changes, landlords remain resilient and optimistic about the future of buy-to-let.
Mortgages for Business (MfB) has notices a “sizeable shift towards complex property types” with landlords adopting different strategies.
A recent survey conducted by the company reveals that many property investors are looking to expand their property portfolios with the purchase of more “complex property types”.
Houses in Multiple Occupation (HMOs), multiple lets which give a higher income yield than single lets are a popular option with 28% of respondents saying they are looking to expand and would be considering purchasing HMOs, according to BfB up from just 10% six months ago.
Commercial and mixed use (semi-commercial) property has also become a more popular choice, piquing the interest of many buy-to-let investors. Those looking to purchase conventional single buy-to-let properties fell slightly to 79% from 83% in figures available to early 2016.
David Whittaker, managing director at Mortgages for Business comments:
“With higher yields it is no surprise that there has been a sizeable shift towards the more complex property types.
“The interest in commercial and semi-commercial property may have also grown as these asset classes do not incur the Stamp Duty Surcharge imposed on residential property.”
The number of investors looking to expand their portfolio according to MfB dipped slightly to 41% from 46% in November 2015, probably due to the tax change announcement and the introduction of the 3% stamp duty surcharge.
The good news say MfB is that an even smaller proportion (14%) plan to shrink their portfolios, down from 18% in November 2015. Despite an increase in investors keeping their portfolio size as it is now, 39% still plan to re-mortgage some of their properties in the next six months.
Again, David Whittaker, managing director at Mortgages for Business comments:
“It is positive to see that fewer landlords are looking to sell property and shrink their portfolios and that a large proportion are still seeing the benefits of remortgaging.
“After the government’s tax crackdown on private landlords I can understand...
why investors are being more cautious about expansion. It will be interesting to see how long this cautious approach will last”.
30% of respondents to the MfB survey said they owned a property in a limited company, this is up from just 22% a year before.
David Whittaker, managing director at Mortgages for Business commented on this:
“We expect this figure to continue to rise in light of the pending tax changes which will peg relief on finance costs, including mortgage interest, to the basic rate of 20% to individual tax payers.
“Since the tax relief announcement we have seen a notable rise in limited company applications, which doesn’t show any sign of slowing down.”
Finally, good news for lenders say MfB, 59% of those looking to expand their portfolios will need to refinance to raise the necessary funds, up marginally from 58% in November 2015.
The survey revealed that there was also a fall in the number of respondents who felt that lenders were not doing enough to support investors, the most common gripes felt by landlords being very similar to the responses given in last November’s survey, including wanting more lending options for limited companies, wanting the removal of upper age restrictions and wanting more of a human/common sense approach to underwriting.
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Buy-to-let landlords adopting new strategies… https://t.co/bxUFwJzdgZ
— LandlordZONE (@LandlordZONE) June 15, 2016