Larger scale landlords with 10 properties or more appear to be the most confident about the private rental sector, and are most likely to grow their portfolios.
The latest edition of Kent Reliance’s Buy to Let Britain report, out today, includes a survey of 856 landlords, run in association with BDRC Continental.
Among those that bought or sold properties in the last three months, investors with more than 10 properties made a net addition of one property. There is no growth among those with five or fewer properties – this is the huge majority of the buy to let sector.
Those landlords still buying properties are increasingly doing so as a limited company, rather than as an individual, allowing them to continue to offset mortgage interest costs against tax.
Kent Reliance’s data shows that in the first three quarters of 2017, more than seven in 10 buy to let applications for house purchase were via limited companies, up from 45 per cent in 2016.
As the amount of mortgage interest that landlords can offset against tax progressively diminishes over the next four years, interest rates rise, and tax bills climb, this will spur on demand for incorporation, Kent Reliance forecasts.
Professionalisation is also being driven by the Prudential Regulation Authority’s recent intervention in the market, claims the report.
Since the end of September, for those investors with four or more mortgaged properties, lenders must account for much more detail about their portfolio, their experience and track record, assets and liabilities, and business plan. For many landlords, this means creating business plans for the first time, and considering longer-term planning for their portfolios.
Andy Golding, Chief Executive of OneSavings Bank, which trades under the Kent Reliance and InterBay brands in buy to let, says: “A fundamental shift in the landlord population is now underway, as buy to let moves from being a popular past-time for hundreds of thousands of British amateur landlords, to the preserve of committed long-term investors with experience and expertise. The pace of professionalisation will only increase following the PRA’s latest moves, and incorporation continues apace.”
He adds that this is not in itself a bad thing “but there is a limit to the amount of change the sector can absorb before we see a damaging reduction in supply – an outcome that would see rents increase for tenants and reduce their ability to save for a deposit for house purchase.”