General misconception in buy-to-let

There seems to be a misconception in the buy-to-let space at present that no new ‘landlords’ are entering the sector and that it’s purely the preserve now of the established, professional landlord with at least half a dozen properties to their name.

Of course, we have seen a growing ‘professionalisation’ of buy-to-let and this will continue but this doesn’t mean that new landlords are not eyeing up the opportunities that exist, particularly in what can now be described as a ‘soft’ housing market.

What we have seen however – and this is clearly down to the PRA lending changes, the tax changes and the increase in stamp duty for the purchase of additional property – is that the “get rich quick landlord” has been put off because this is a market which cannot deliver that type of short-term reward anymore. Indeed, while it hasn’t for some time, the recent regulatory and taxation changes make this impossible.

2019 will be the year for limited company and buy-to-let

Research shows lenders are expanding their product range for buy-to-let limited company mortgages. This has come about since the announcement of the tax changes landlords now are facing.

Limited company buy-to-let mortgages now account for nearly 28% of all products on offer. Not all lenders offer buy-to-let mortgages to limited companies, but we can confirm this is changing all the time. More lenders are recognising limited company business is going to become a great deal more popular than years gone by.

The cost of a limited company mortgage is on average 0.7% higher than the normal product plus some set-up fees are higher as well. Most of the fees payable are on a percentage basis and range from 0.5% to 1.5% and an investor should be very careful of their choice.

Demand is growing for rental properties

Demand for rental property has grown by a 7.4% against figures issued for last year a recent survey has highlighted.

The problem is now that supply of properties has fallen by 21% in the same period. On average for every quality property available to rent 4 people are in competition for the occupancy.

This situation is causing great concern for prospective tenants across the whole of the UK and especially in the areas bordering London.

On top of all these disturbing figures it is expected that the demand for rental properties is likely to increase well into 2019 and beyond. Facts are young couples are still and are increasingly finding it difficult to raise the deposits necessary to buy their own property.

Demand is growing fast

Despite most landlords being hit by changes to mortgage tax relief, appetite for further investment remains, new research has revealed.

According to the new report, the proportion of respondents looking increase their portfolios has risen from 40% to 58% since November 2018. It is also up on the 41% of landlords that were looking to expand their portfolios a year ago.

Over 200 property investors completed the survey, answering questions on their portfolios and how they were financed. Research found that landlords have been increasingly choosing to fix for five years instead of the more traditional three. This is likely due to ongoing uncertainty in the market which Brexit is causing.

There has been a huge shift in investor preferences, with five-year fixed rates now the preferred option for 48% of landlords, up from 38% which is quite dramatic. Three-year fixed rates are now less popular even than 10-year fixes, being chosen by just 5% of respondents.