Landlords more optimistic on future of buy-to-let

Row of terrace houses

The latest Private Rented Sector trends report from buy-to-let mortgage lender Paragon has highlighted landlords were feeling generally more optimistic about the future, but remained cautious in their approach.

The PRS Trends Survey, interviewed a panel of over 200 experienced landlords on their thoughts and feelings on the buy-to-let market, and the factors shaping the landscape during Q4 of 2016 and the coming months.

84% of the panel were residential landlords who had been in the sector for more than ten years and 61% of the panel are regarded as professional landlords (which Paragon define as those who own three or more buy-to-let properties).

Landlord confidence

With the various changes in the industry of late 65% of landlords surveyed said felt the same about the prospects of their portfolio as they did last three months ago. However, 22% are now more optimistic and only 12% feel more pessimistic, down from 18% in the Q3 survey.

A massive 94% of the panel described the buy-to-let market as stable or growing, given the high demand from tenants, with only 3% suggesting there had been a decline.  

Buy, sell or hold?

In Q4 2016 13% of landlords reported an intention to buy property in the coming months and 17% to sell. However, it should be noted that the 13% intending to buy was up from 11% in the previous quarter and the 17% intending to sell was down from 22% which implies a spark of returning optimism amongst UK landlords.

Tax and Legislation

With the government’s mortgage interest relief tax changes set to be phased in from 1st April 2017, 58% of respondents, who pay basic rate income tax, said they have already or will take action, most commonly:

  • 24% increased the rent they charge to cover some or all of the additional cost
  • 21% plan to maintain their current properties, but not buy any more
  • 16% will sell some of their properties and not buy any more

Awareness of the legislation

The panel was asked what their level of understanding of the tax relief changes was. The majority (71%) felt they have a good understanding, whereas 29% either didn’t understand the changes or want more information on them.

Considering the number of legislative changes that have been brought into the buy-to-let market over the last 12 months, it is encouraging to see that a large number of landlords are prepared for the change, however, that does still leave a significant proportion liable to be caught out.

Cautious optimism

John Heron, Managing Director of Paragon Mortgages doesn’t put the increase in landlord optimism down to a lack of concern about what the government is doing, rather he feels it comes from a place of preparedness brought about by an adjustment in strategy:

It would be wrong to say that landlords are no longer concerned about the impact of Government policy on the sector, but we are starting to see some improvement as landlords develop their strategies to address the impact of the changes.

Once the new legislation comes into effect in April it will, over time, become clearer which landlords have adequately prepared and where adjustments need to be made by others.

If you are uncertain of your position, seek the advice of a qualified tax professional.

Find a qualified tax professional in your area:

Chartered Institute of Taxation:

Institute of Chartered Accountants in England and Wales:

Association of Chartered Certified Accountants:

Institute of Chartered Accountants in Scotland:

This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.