More and more Landlords are switching

There is yet more evidence that an increasing number of buy to let investors are setting up limited companies to offset the worst impact of changes to mortgage interest tax relief.

The latest Mortgages for Business “Limited Company Buy to Let Index” reveals there was a surge in the proportion of applications for buy to let properties made by landlords using limited companies at the end of 2020.

Over the past 18 months, landlords’ behaviour has changed as the sector comes to terms with the new tax regime. The increased use of Limited Company structures includes both new purchases and transfers - that is, purchases made by landlords selling their personally owned property to their limited company.

The proportion of re-mortgage applications made via Limited Company structures also increased substantially of the last 12 months and figures show this trend is continuing into 2021. This is a sign that greater numbers of investors are choosing to transfer their properties into limited company names, effectively reducing the proportion of re-mortgaging applications made by individuals.

Landlords selling property are reaping rewards.

The latest figures found sellers in London gained £264,981, over four times more than those selling outside the capital. One in four landlords who sold their home in London did so for at least twice what they paid for it an average of 8.3 years ago.

Landlords selling in 2020 owned their homes for nearly nine years. In 8 of those last 9 years house prices have risen. Even in areas where price growth has lagged most landlords have made a profit from rising prices.

More changes for landlords

Each new year brings with it a set of changes that landlords need to be aware of. The disruption caused by Covid-19 led to policy changes impacting many aspects of society and the private rented sector (PRS) was no different.

When combined with legislation that has altered as a result of Brexit, 2021 will usher in many changes in the way landlords operate.

Here, we highlight some of the key fiscal and regulatory developments that are on the horizon for the year ahead.

Buy-to-let’s have a bright start

It makes no sense to tempt fate in this marketplace, and one swallow does not make a summer, but the latest CML statistics for the buy-to-let sector in January appear to show a relatively strong start to the year.

These initial statistics certainly chime with our own experience as we moved into 2021 with plenty of enquiries, applications, and activity. This all seems to set a foundation for a solid set of figures for the coming year.

Overall, the statistics are clear on where the current balance of power lies within the buy-to-let sector right now with re-mortgage activity in the ascendency. During January, purchase activity was at an eight-month low, but as the CML itself said, there is always a winter lull.