Results from the latest Property Investor Survey conducted by Mortgages for Business reveal that 44% of landlords plan to expand their portfolios before July 2018. This is despite most understanding that they will be affected by the changes to income tax liability.
When asked what types of property they intended to purchase as part of their expansion strategy, 75% said that vanilla buy to let would form part of the mix. HMOs, which are known to produce the highest yields, often close to 10%, were also cited as a preferred option.
However, there was an increase (from 9% to 15%) in the number of landlords who said that they intended to reduce the size of their portfolios in the next six months as a direct result of the tax changes. The fact that the remaining 41% said they would do nothing demonstrates that an element of wait and see still exists among landlords.
Commenting on the results, Steve Olejnik, COO at Mortgages for Business 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.”
Limited companies as borrowing vehicles were the popular choice for those expanding their portfolios with 58 % opting for this route and a further 20% advising they would be purchasing both personally and via a corporate structure.
Surprisingly, 48% said 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. It is thought that this might be because some landlords have not yet applied for finance since the guidance was introduced or they have their financial affairs in order so do not see the new policies as a major hindrance.
Mr Olejnik said:
“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.”
Around 54% of landlords who responded to the survey said that they had not sought any professional advice relating to how the tax changes might affect them.
Commenting on this, Mr Olejnik said:
“This is a worrying statistic which means we must continue to raise the issue with landlords every time they approach us for finance.”
The survey was carried out over a two-week period in December 2017, having been sent to MFB clients and advertised across social media and landlord forums. A total of 254 property investors completed the survey, answering questions on their portfolios and how they were financed.