Despite a bumpy year for buy-to-let, most landlords feel positive about the future, according to a new survey.
However, many landlords are upping rent or incorporating as limited companies in response to the raft of recent buy-to-let changes.
- Is it worth buying my investment property through a company?
- 8 things every landlord can relate to
- What the 2016 Autumn Statement means for landlords
- Do I need landlord insurance?
Landlord confidence bounces back
Kent Reliance’s latest Buy-to-Let Britain report, released today, shows that 54 per cent of landlords now feel positive about the future of their rental portfolios, up from a low of 39 per cent in the second quarter of 2016.
Almost one quarter of landlords are expecting to expand their portfolios in the next year, which is twice as many as the number expecting to sell properties.
It seems that this bounce is partly due to a more optimistic attitude towards Brexit: immediately after the EU referendum vote, only 45 per cent of landlords thought the outcome would have no impact or a positive impact on them, whereas that proportion has now increased to 54 per cent.
However, landlords have been bruised by all the tax changes announced this year and remain cautious as a result, with 76 per cent seeing government intervention as the key threat to their property investments over the next year.
Property investors ‘roll with the punches’
Commenting on the research, Andy Golding, CEO of OneSavings Bank (which trades under the name Kent Reliance), said:
“Property investors have had to roll with punches in 2016. The stamp duty levy clearly took its toll on the market, and combined with the forthcoming tax changes, landlords have felt at the mercy of a political agenda. But confidence is returning as landlords take action to limit the damage to their finances.”
Landlords incorporate to beat tax changes
The research also shows that huge numbers of landlords are setting up or planning to set up limited companies due to the changes in buy-to-let tax relief that will begin to take effect from April 2017.
Over the last three months, six in 10 buy-to-let mortgage applications have been made by limited companies, with 11 per cent of landlords saying they’ve incorporated or moved holdings to a partner who pays tax at a lower rate. A further 25 per cent have plans to do so, which would equal half a million landlords nationwide.
This is a response to the planned reduction in mortgage interest tax relief, which will no longer mirror income tax bands, but will instead be capped at 20 per cent regardless of income. For higher or additional rate taxpayers this could mean much heftier tax bills.
Because limited companies are not affected by a lot of the changes, many landlords are incorporating as limited companies to minimise the impact.
Rent growth slows
Meanwhile, average UK rent has continued to increase, reaching a record high of £881 per month in September, but the pace of growth has slowed markedly since the beginning of the year.
This is probably down to more rental properties coming onto the market as landlords rushed to buy property at the beginning of the year before the buy-to-let stamp duty rise took effect.
But the tenant population is growing, so strength of demand coupled with the pressure on profits thanks to the tax changes means that a third of landlords expect to increase their rent in the next six months.
As 2017 approaches, how are you feeling about the prospects of your rental portfolio? Tell us in the comments.