Landlords looking to expand portfolios, despite BTL tax squeeze

Four out of 10 portfolio landlords are planning to expand their buy-to-let holdings over the next year, according to a new report from Aldermore.

Although there is less appetite for expansion among those with fewer than four buy-to-lets,  around one in six of these landlords  (17 per cent) say they are planning to add to their portfolio in the year ahead.

This more buoyant outlook comes despite a raft of tax and legislative changes which have squeezed margins for buy-to-let investors. 

But as this report highlights, many landlords still see the rental market as a good investment opportunity, with yields far outpacing current savings rates.

In contrast, less than one in 10 (8 per cent) of private landlords said they intended to reduce the number of properties they own. Those in this group were predominantly doing so as a result of government actions. Many cited too many restrictions and higher taxes.

These changes have help contribute to a fall in new buy-to-let lending over the past year, although remortgaging in this sector has increased by 25 per cent.

Aldermore says it report shows that landlords are realistic about tougher conditions in the sector.

A quarter of those surveyed (25 per cent) say changes in tax relief are their main challenge, while over a fifth (22 per cent) highlighted the increase in stamp duty that is now levied on buy-to-let and second home purchases.

One in six of the landlords surveyed (17 per cent) say that will increase rents to cover these higher costs.

Aldermore’s commercial director Charles McDowell says: “There is no denying that the buy-to-let market has taken a bit of a bettering, thanks to a multitude of regulatory, underwriting and tax changes. However, we are pleased – and slightly surprised – to see there remains a net sense of optimism amongst buy-to-let landlords.

“Despite these changes, many still view buy-to-let as a good investment with expansion on the horizon, particularly amongst those who are specialists in this area.”

The report also found that one in seven (15 per cent) of landlords who are not expanding their portfolio are planning to remortgage some or all of their properties. The main reason is to mitigate any interest rate rises (cited by 40 per cent of respondents). One in four (27 per cent) said they wanted to unlock capital, while 25 per cent say they are not satisfied with their lender.

McDowell adds: “Our research has highlighted that whilst landlords have weathered the storm of change, policy makers need to shift the spotlight away from this market. There has been a multitude of changes to the market in quick succession, with little time for them to bed in properly.”

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