Marijana No Comments

Buy-to-let market offers opportunities for lenders

Judging by the newspaper headlines about the slowing housing market, the government’s buy-to-let (BTL) crackdown and the demise of the amateur landlord, you’d think there couldn’t be a worse time to enter the BTL lending market. But that’s exactly what we’re doing, and with good reason.

The BTL market may not be as buoyant as it was a few years ago, but it is still a very large market and is holding up well in the face of the government’s tax and regulatory changes. When you look at the facts, there are plenty of positive signs. Last year, the average market value of BTL landlords’ properties hit a record high and landlords are benefiting from strong growth in rents in many parts of the country. On the debt side, landlords are also able to choose from the broadest range of BTL lending products seen in the market since the financial crisis; and thanks to healthy competition between lenders and continued low interest rates, they are able to take advantage of low-cost financing deals.

While many of the small, highly geared landlords are struggling and starting to leave the sector, the number of large landlords with portfolios of half-a-dozen or more properties is actually increasing. These better capitalised, more professional landlords are best placed to adapt to changes in government policy. They also continue to see property as an attractive investment, offering good levels of return in a world where interest rates are unlikely to rise significantly any time soon. The market may be tough in London and the South East, where yields are at historically low levels and it is therefore difficult to generate the income returns needed to service a higher loan-to-value (LTV) loan, but there is still money to be made from BTL property and strong demand for BTL loans across the UK.

”Specialist lenders like us are better placed to service the needs of larger, more professional landlords than the high-street lenders, which are set up to do a large volume of simple deals”

The growing importance of larger, more professional landlords in the BTL sector plays into our hands as a specialist lender. These borrowers tend to be buying through limited companies and SPVs, and have more complex borrowing requirements than smaller landlords. Specialist lenders like us are better placed to service their needs than the high-street lenders, which are set up to do a large volume of simple deals.

As an industry, we have also become increasingly competitive. The gap between the rates offered by high-street banks and specialist lenders has narrowed as the mainstream lenders have retreated and we have become more active. Our own cheapest rate on a two-year fixed-price deal is 3.39%.

Launching into the BTL market also fits in with our drive to offer property professionals a broad range of products. We are now much more than just a bridging lender. In 2017, we launched our second charge product, which has proved really successful – we have since completed more than 2,000 second charge loans. Last year, we also entered the development lending market, where we are able to offer small developers loans at up to 75% loan-to-GDV and 85% loan-to-cost.

One-stop shop

Our expansion into these new areas of the market means we are able to offer property professionals a one-stop shop. Instead of having to switch between different lenders, they can come to us for all their borrowing needs. Being able to offer a range of different products is particularly important in today’s increasingly uncertain world. Borrowers want certainty from their financing arrangements and that can come from building relationships with a small number of lenders, rather than constantly chopping and changing. If a borrower has taken out a bridging loan with us to acquire a property, then it is far easier for us to refinance that loan than it would be to write a loan with an entirely new customer. We already know the borrower and the property and understand the business plan.

Indeed, we are already seeing some of our customers moving between products, perhaps starting out with a bridging loan and then turning to us again for a development loan. We expect it will be the same story with BTL lending. We will undoubtedly broaden our client base, but we also expect existing customers to account for a significant portion of our BTL lending. Small developers that have turned to us for bridging loans or development finance can now use us to finance their BTL property portfolios. A BTL loan can also be a good option for developers that perhaps find it hard to sell some units in a new development, and want to let them out until conditions in the for-sale market improve.

We are also seeing growing demand for bridge-to-let loans, which naturally complement BTL loans. Some landlords are struggling to achieve the returns from their BTL properties that they once did because of tax changes and new regulations. Naturally, they are therefore looking for ways to boost their returns, and refurbishing a property that is in a poor state of repair with a view to then letting it out is an increasingly popular strategy. A bridge-to-let loan can be a great way to finance such a project and at the end of the loan term, the borrower can switch to a BTL mortgage.

So despite all the well-documented challenges facing the BTL market, we see plenty of opportunities, especially for specialist lenders like us that are geared up to support larger BTL landlords and SME developers. Ultimately, we believe that for investors that are willing to take a long-term view, the future for the property sector is positive and so we are happy to be entering the BTL lending market, and to continue growing the range of lending products we offer property professionals.

By Stephen Wasserman

Source: Property Week

Marijana No Comments

The buy-to-let market stabilises

Following from regulatory and tax changes, the buy-to-let market seemed to settle in April, remaining unchanged from the previous year, UK Finance’s Mortgage Trends Update has found.

There were 5,100 new buy-to-let house purchase mortgages completed in April, the same as this time last year, and there were 14,400 remortgages in the buy-to-let sector, the same as this time last year.

Gareth Lewis, commercial director of property lender MT Finance, said: “The buy-to-let numbers really stand out because they have remained stable compared with the same period last year, suggesting sustainable activity.

“This is remarkable given all the negativity surrounding the sector and the harsher tax and regulatory environment. Tales of landlords exiting the sector in their droves seem wide of the mark: these figures suggest that isn’t the case at all.

“Part of the continued demand for buy-to-let is down to the lack of alternatives investments. Savings rates are low and monitoring the stock market is almost a full-time job.

“As long as you play the long game with property, there is more certainty of growth and people tend to trust bricks and mortar more than other investments.”

In 2015 the government announced it would start to phase in mortgage tax relief. In 2017 to 2018 the deduction from property income was restricted to 75% of finance costs, with the remaining 25% being available as a basic rate tax reduction, in 2018 to 2019 the finance costs are down to 50% and during 2019/2020, 25%.

From 2020 to 2021 all financing costs incurred by a landlord will be given as a basic rate tax reduction.

Andrew Montlake, director of the UK-wide mortgage broker, Coreco, added: “What’s interesting is that the impact of recent tax changes on the buy-to-let market appears to have settled down.

“The buy-to-let market is not what it was but has now reached a new equilibrium.”

Richard Pike, Phoebus Software sales and marketing director, said: “Even the buy-to-let sector is holding its head above water which, given the regulatory and tax changes that landlords have had to withstand, is somewhat surprising.”

Simon Heawood, chief executive and co-founder of Bricklane.com, was less pleased with the figures.

He added: “The number of new buy-to-let mortgages has fallen off a cliff over the last few years, with the total down 50% since 2016. Based on today’s stagnant numbers, we shouldn’t expect that trend to change in the near future.

“The rental market has become increasingly difficult for new and existing landlords to navigate. In addition to a raft of tax penalties, the recent introduction of the Tenant Fees Act and the proposed scrapping of ‘no fault’ evictions show that the market is moving in a pro-tenant direction.

“Landlords will soon be expected to provide a higher standard of service and, faced with diminishing profits and an increasing workload in the buy-to-let market, we expect to see more and more individuals revaluating their portfolios, with many then looking at alternative routes to invest in this asset class.”

There were 18,920 new remortgages with additional borrowing in April, up 0.3% year-on-year. For these remortgages, the average amount taken out in April was £54,000.

Furthermore, there were 19,140 simple pound-for-pound remortgages, with no additional borrowing, 6.2% fewer year-on-year. In total, there were 3.1% less fewer mortgages in April 2019 than in the same month a year earlier.

Jonathan Sealey, chief executive at Hope Capital, said: “In terms of the value, both simple refinance and equity remortgages are down.

“With a steady rise over the past few years in the trend for making home improvements rather than moving, this could suggest some homeowners looking to remortgage in order to add value to their homes ie for a larger equity withdrawal – are now looking to alternative funding for a more tailored service.

“Specialist lenders are continuing to see steady business coming through suggesting that customers increasingly turn to lenders who can offer them a more bespoke solution.”

By Michael Lloyd

Source: Mortgage Introducer

Marijana No Comments

Buy-to-let market doom ‘overdone’

The buy-to-let market is in better shape than many might think, a lender has said.

John Goodall, chief executive of specialist buy-to-let lender Landbay, said recent industry commentary that states the market is on a downturn and that regulatory changes are forcing landlords to sell up was “a little overdone”.

Last week research from Arla Propertymark showed there had been a 25 per cent increase in the number of landlords selling up their property and those at the coalface said regulatory changes and a reduction in tax relief had stopped many viewing the buy-to-let market as a profit maker.

But Mr Goodall disagrees. Speaking to FTAdviser, he said: “There’s always been a churn in the market. Of course there are some people selling up property and getting out the market but that’s always been the case.

“At the moment, the highlight is on those selling rather than those buying. But those buying do still exist. Some small buy-to-let investors are getting out but it’s still only a small fraction.”

Mr Goodall cited UK Finance figures which showed that, in terms of outstanding stock, the buy-to-let market grew from £237bn to £243.9bn over the course of 2018 — an equivalent of 2.7 per cent.

Landlords have been subject to a number of regulatory changes in recent years, with the introduction of an additional 3 per cent stamp duty surcharge on second homes in April 2016, which was closely followed by cuts to mortgage interest tax relief.

Buy-to-let borrowers are also now subject to more stringent affordability testing under the Prudential Regulation Authority’s tightened underwriting rules.

Mr Goodall said the changes are more likely to scare off smaller landlords with only a few properties, which would eventually lead to a more professional industry.

he said: “Small investors that hold property in their own name have seen the biggest changes in terms of tax and stricter regulations are likely to affect smaller landlords more.

“But this has raised standards in the market and means most portfolio owners now act like a small, formal business.

“For example, of course it’s a good thing that houses of multiple occupancy have stricter licensing rules but this could turn off smaller landlords.”

According to Mr Goodall, more business-like landlords entering the market was a good thing would eventually help tenants.

He added: “I think it’s far better for the tenants to think their landlord is committed to it and that they are not just in it for the short term.

“If someone’s doing it on the side and alongside a full time job, the service is going to be worse for the tenant and the tenant does not have as much security.”

Observers in the industry have commented that a reduction in landlords could increase the price of renting and hurt consumers.

Mr Goodall refutes this, saying the market was self-regulating and “if rents go up, that entices more landlords, so more competition and the market would work itself out”.

He also pointed out that the buy-to-let market does not represent the entire private rental sector — as many who buy property can do so without a mortgage or some may inherit property.

The UK’s stagnant housing market — annual house price growth remaining under 1 per cent and home-mover rates on the decline — is often put down to political uncertainty and consumers holding back on decisions until after Brexit.

Mr Goodall agreed with this analysis and suggested uncertainty was more likely to be the cause of any dip in the buy-to-let market.

He said: “Brexit uncertainty is a more pressing issue. People will not invest at the moment.

“Landlords should be getting into it with a five to 10 year plan, but people don’t want to make those kind of big changes with Brexit on the horizon. There’s a little bit of sitting on the sidelines.”

Rachel Lummis, adviser at XpressMortgages, also said she had yet to see any evidence of a sell off of buy-to-let stock from their landlords.

She said: “We are seeing more landlords purchase via a limited company now rather than in their personal names which is resulting in landlords with portfolios with a mix of ownership in their private name and ltd company.”

Ms Lummis added that the type of property landlords liked — typically a two bed flat — had shifted to more high yielding properties such as HMOs and student accommodation, while many were also looking further afield, out of London and Surrey..

By Imogen Tew

Source: FT Adviser

Marijana No Comments

Labour proposes major reform of housing market

Land could come under ‘common ownership’, inheritance tax could be abolished and the buy-to-let market could be tightened under housing proposals floated by the Labour party yesterday (June 3).

In a paper entitled Land for the Many, written by a group of academics, economists and land experts for the Labour leadership, and published by the Labour party, a set of reforms aimed to stabilise house prices, end the “buy-to-let frenzy” and revolutionise tax policy was put forward.

The authors recommend a Labour government should set an explicit goal to stabilise house prices and pinpoint land price inflation as the root of house price inflation.

To do this, a Labour government would discourage land and housing from being treated as “financial assets” and one solution would be a radical common ground trust — a non-profit institution that would help prospective buyers purchase homes.

At the buyer’s request, the trust would buy the land underlying the property to make the upfront cost of home ownership more affordable. The buyer would then pay a land rent to the trust.

The paper suggests that by bringing land into common ownership, “land rents can be socialised rather than flowing to private landlords and banks” and “debt-fuelled and speculative demand can then be reined in without the risk of an uncontrolled or destabilising fall in values”.

In order to end the so-called buy-to-let frenzy the authors suggested major reforms to the private rented sector.

These include open-ended tenancies, a cap on annual rent increases and firmer regulation and restrictions on buy-to-let mortgages.

Under the reforms, landlords would lose their power to evict a tenant who has not broken the terms of the agreement in the first three years of the tenancy and would then have to provide grounds for eviction after that point and rent increases would be capped at the rate of wage inflation.

The paper also suggested the Bank of England should “encourage a shift in bank lending away from real estate” towards “more strategically useful sectors of the economy”.

Banks currently have a strong incentive to lend against housing collateral as capital requirements for mortgage loans are lower than for other types of lending such as small businesses, it stated.

This bias could be reversed by raising the risk weightings for mortgage lending and lowering the risk weightings for productive forms of lending, or by enforcing a maximum ratio of mortgage lending to productive lending.

Once house prices are “stabilised” — due to the common ground trust — a Labour government could then tighten the rules over maximum loan-to-income and loan-to-value ratios which the paper states would prevent any future debt fuelled re-inflation of house prices.

The paper goes on to discuss tax reforms, including a progressive property tax, stamp duty reform and inheritance tax abolition.

A progressive property tax would replace council tax and would be payable by owners of property, not tenants.

Under this, empty and second homes would automatically be taxed a higher rate and a surcharge would apply on properties owned by those who are not resident in the UK for tax purposes.

Labour would also propose that stamp duty land tax should be phased out for those buying homes to live in themselves and that capital gains tax for second homes and investment properties should be increased.

Under the new reforms, inheritance tax would be replaced with a lifetime gifts tax levied on the recipient.

A lifetime gifts tax would be levied on the gifts received above a lifetime allowance of £125,000. When this lifetime limit is reached, any income from gifts would be taxed annually at the same rate as income.

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “Labour’s proposals are no real surprise as they are along the lines of similar ideas which have been previously mooted.

“Although some people may be scared by the prospect, some of the ideas have merit, particularly regarding the need to modernise the current outdated council tax system.

“Ensuring that upper bands are added and regular revaluations take place would make it fairer for all as current limits have not kept pace with inflation.

“As for the other measures, not many people would take issue with stable prices and more affordable homes but pulling that particular rabbit out of the hat has always proved difficult in the past.

“Killing market forces and the ability of the private sector to generate much-needed housing for all will remain important unless the public sector is going to take over the majority of housing provision.”

By Imogen Tew

Source: FT Adviser

Marijana No Comments

Private rental sector continues to grow amid buy-to-let market uncertainty

The proportion of privately rented homes has fallen below 20% of all tenure types for the first time in three years, despite the number of rental properties actually increasing.

Government housing data shows that 19.9% of dwellings in England were rental properties in the year to March 2018.

This was down from 20% in 2017, 20.4% in 2016 and 20.4% in 2015.

However, despite the proportion decreasing, the amount of rental properties still increased by 10,000 between March 2017 and March 2018, the Government figures show.

This is despite ongoing concerns about landlord exits amid extra Stamp Duty charges and the withdrawal of buy-to-let tax reliefs.

Meanwhile, the proportion of owner-occupied dwellings increased for the second year in a row, increasing by 226,000, and representing 62.8% of all stock.

The total property stock in England as of March 2018 was 24.2m.

Of this, 15.3m were owner-occupied, 4.8m private rented, 2.5m rented from housing associations and 1.6m rented from local authorities.

By MARC SHOFFMAN

Source: Property Industry Eye

Marijana No Comments

Experts warn of further buy-to-let changes

Advisers and their landlord clients should not rule out further changes to the private rental sector, according to buy-to-let experts.

A panel at the financial services expo — made up of Adrian Moloney of OneSavings Bank, David Whittaker of Keystone Private Finance, and Steve Cox of Fleet Mortgages — said ongoing political uncertainty and the potential for a change of government could lead to more alterations for landlords, especially in regards to tax.

The panel, which was speaking last week (May 15) did not rule out the idea that a future government could further cut back mortgage interest tax relief for landlords.

Landlords have already seen the introduction of an additional 3 per cent stamp duty surcharge on second homes in April 2016 and cuts to mortgage interest tax relief.

Buy-to-let borrowers are also now subject to more stringent affordability testing under the Prudential Regulation Authority’s tightened underwriting rules.

Mr Moloney said: “I think it would be a very bold move because you’d have to start changing tax legislation potentially across other areas and I think HM Revenue and Customs is currently happy with the level of tax coming from buy-to-let landlords.

“But there is no way of knowing how another government could act.”

Mr Whittaker, agreed that a government of a different leaning to the current Conservative one could make changes to the tax system that would “create more waves and more damage”.

Labour’s Jeremy Corbyn for instance has long spoken of the need to fix the ‘broken’ housing market.

In January, the Intermediary Mortgage Lenders Association warned that landlords would start to feel the pinch of new regulation in their tax returns for the first time.

And the effects are already visible. UK Finance lending trends, published last week (May 16), showed that about 5,000 new buy-to-let purchase mortgages were completed in March — 9.1 per cent fewer than in the same month in 2018.

The panel was also asked about the recent government proposal to ban section 21 evictions.

Last month (April 15), the government proposed a consultation on abolishing the so-called ‘no fault’ section 21 notices, which give landlords the power to evict tenants at the end of their tenancy without a reason.

At the time, landlords warned there were dangers, such as a shortage of landlords and less competition for consumers, if the reforms were not carried out correctly.

Mr Whittaker said since the announcement, the government had accepted that in order to shake up how a section 21 order works, there had to be an improvement of the processes around section 8 notices — similar to a section 21 but where the landlord has to give a reason.

He said: “There has been a recognition that the government can’t get rid of the existing rules without having something in its place.

“The government appears to know that if they have a continuing lack of political appetite to run a social housing policy, let alone fund it, they can’t afford to mess up the private rental sector too much.”

Mr Whittaker went on to say that lenders were part of this debate as it would ultimately impact their landlord customers if they were unable to get possession of their property.

Mr Moloney added that until there was more certainty surrounding the buy-to-let market, lender and borrower activity would be impacted.

Mr Cox agreed that the government’s wider reliance on the private rental sector meant it had to reconsider such substantial changes.

He said: “I think the most important part is that the government, whether reluctantly or not, needs a buoyant and thriving rental sector because a social housing policy – or lack thereof – is not going to take care of the issue.”

By Imogen Tew

Source: FT Adviser

Marijana No Comments

Cambridge Top For Buy To Let Property Rental Demand

The University city of Cambridge has the highest buy to let property rental demand in the UK according to new research.

Inventory and property compliance specialists Verismart have analysed rental listing data across the major property portals, ranking each of the UK’s 100 largest cities on the proportion of rental stock available to that already let, to ascertain where the highest rental demand locations are.

Cambridge came top with 57 per cent tenant demand making it the most sought-after city for rental accommodation.

The list of areas with the highest rental demand was dominated by the London commuter belt, with Basingstoke close behind with 56 per cent tenant demand, followed by St Albans on 53 per cent.

Crawley at 47 per cent and Tamworth 46 per cent were in fifth and sixth place respectively of the highest rental demand areas across the UK.

Bristol was the first city outside of a commutable range to London to make the top 10 at 45 per cent, joined by York (43 per cent), Worthing (43 per cent) and Hastings (42 per cent), completing the top ten.

Rental demand in London may be high, but in relation to the stock listed and the stock let, the capital ranks just 53rd for tenant demand when compared to the top 100 UK cities.

Inside the capital, high rental prices see many renters looking to the outskirts with the highest levels found in Bromley (41 per cent), Sutton (39 per cent), Bexley (38 per cent), Havering (35 per cent), Richmond (35 per cent) and Waltham Forest (35 per cent).

Lewisham was the only inner borough to make the top ten with demand at 33 per cent along with Enfield, Kingston and Greenwich.

Founder of VeriSmart, Jonathan Senior, commented: ‘While London will always remain attractive from a buy-to-let point of view, it’s clear that the current market slowdown and wider economic and political uncertainty has stretched to the rental sector.

‘It would seem many are still very much sat on the fence ahead of a Brexit solution and although London is home to some of the largest levels of stock, many are choosing to refrain from a commitment until stability returns. This is most prevalent across the prime central market which is understandable given the larger financial commitments, however, the outer stretches of the city remain in good favour with the capital’s tenants for the time being.’

Source: Residential Landlord

Marijana No Comments

Buy-to-let mortgage costs show little movement

Mortgage costs have remained stable in the buy-to-let market with little movement recorded over the past three years despite many changes in the market, Mortgage Brain’s buy-to-let product data analysis has found.

The data, as of 1 March 2019, showed that the cost of a number of 2 and 5-year fixed rate mortgages have remained static when compared to the costs at the beginning of December 2018.

The cost of a 70% LTV 2-year tracker and a 70% LTV 5-year fixed fell by 2% and 1% over the same period. The reductions in cost – while marginal – do offer buy-to-let investors a potential annual saving of £126 and £72 respectively on a £150,000 mortgage.

By contrast, the cost of a 3-year fixed buy-to-let 70% LTV is now 2% higher than it was in December and equates to an annual cost increase of £125.

Mortgage Brain’s longer-term analysis, however, does show that the buy-to-let market is still in a healthy position compared to this time three years ago – a period when the controversial 3% stamp duty hike for landlords was introduced.

The cost of a 60% LTV 5-year fixed buy-to-let mortgage, for example, is now 11% lower than it was in March 2016, while a 60% LTV 2 and 3-year fixed are 7% and 10% cheaper.

By Michael Lloyd

Source: Mortgage Introducer

Marijana No Comments

Overseas Property Investor Numbers Fall

The number of UK buy to let property investments let out by investors based overseas has more than halved in the last eight years.

The latest data released by Hamptons International has revealed that the percentage of overseas based landlords letting buy to let properties in the UK fell from 14.4 per cent in 2010 to just 5.8 per cent in the first 11 months of 2018 – the lowest level on record.

Every region in the UK has seen a fall in the proportion of homes let by an overseas landlord since 2010.

The largest drop has been seen in London which has gone from one in four (26 per cent) of homes let in London owned by an overseas based landlord in 2010, to just 10.5 per cent this year. A fall of 15.5 per cent.

In other parts of the UK, the proportion of overseas based landlords has fallen by 10 per cent in the South East since 2010, followed by the North East and East Midlands, both experiencing a drop of 6 per cent.

Outside the capital, Yorkshire & the Humber has the highest proportion of homes let by an overseas based landlord (6.7 per cent), but this region has only seen a 4 per cent fall in overseas based landlords since 2010.

Western Europeans make up the biggest group of overseas based landlords at 34 per cent, followed by Asian (20 per cent) and North American (13 per cent).

However, since 2010 the proportion of Western European based landlords has fallen by 2.1 per cent, compensated for by a pickup in Asian landlords (+2.1 per cent). Middle Eastern based landlords have also risen by 1.4 per cent since 2010 and now account for 11 per cent of overseas based landlords.

Head of Research at Hamptons International, Aneisha Beveridge, said: ‘The proportion of homes let by an overseas based landlord has more than halved since 2010. Sterling’s depreciation since 2016 undoubtedly makes it cheaper for international buyers to purchase property in Great Britain. However, the conversion of pounds back into local currency means additional costs which cut into an overseas landlords’ monthly income. This combined with a harsher tax regime for overseas investors is dissuading some international investors from entering the rental market.

‘Throughout this year rental growth has been sluggish averaging 1.5 per cent and only passing 2.0 per cent on two occasions. Affordability is not just an issue for those looking to buy a home, but impacts tenants paying rent too. And these affordability barriers will continue to keep a cap on rental growth in the future.’

Source: Residential Landlord

Marijana No Comments

Extent of landlord exodus to limited companies revealed

Landlords are increasingly transferring properties to limited companies to navigate tax changes in the buy-to-let market, according to lender data.

Figures from Shawbrook Bank showed the proportion of buy-to-let mortgages completed by individual landlords had fallen from 68 per cent in the first half of 2015, to 34 per cent in the same period of 2018.

Meanwhile the proportion being completed by limited companies had doubled from 32 per cent to 64 per cent in the same period.

The buy-to-let market grew rapidly after the financial crisis but tax changes and the introduction of stricter affordability testing meant there was steep fall in the number of buy-to-let mortgages.

The introduction of an additional 3 per cent stamp duty surcharge in April 2016 was closely followed by the abolition of mortgage interest tax relief for landlords, to be phased down to a 20 per cent flat rate in 2020, further pushing the limits of landlord profitability.

Buy-to-let borrowers are also now subject to more stringent affordability testing under the Prudential Regulation Authority’s tightened underwriting rules.

Shawbrook Bank has said the reduction in mortgage interest tax relief had led to an increased professionalisation among landlords, with those in a private limited company able to treat interest payments as business expenses to be offset against profits.

Gavin Seaholme, head of sales at Shawbrook Bank, said the buy-to-let figures showed individual landlords were moving across to limited companies but warned this may not always be suitable.

He said: “Firstly, borrowing through a limited company structure is generally more expensive than for an individual, offsetting some of the expected tax savings.

“Secondly, for private landlords with existing portfolios it can be very costly to actually transfer the properties into limited company ownership due to capital gains tax which is due upon the sale and stamp duty due when the newly set up company purchase the properties.

“Together these one-off payments can leave a significant dent in the finances of buy-to-let investors, which makes careful planning necessary.”

Mr Seaholme said the more favourable option could be to convert or create a limited company to continue on the property journey, subject to the correct tax and planning advice.

In its assessment of the buy-to-let market in July, Shawbrook Bank predicted demand for buy-to-let mortgages would fall further over the coming years and expected many landlords to only feel the true impact of changes next year when filing their tax returns for 2017-2018.

Stuart Gregory, adviser and managing director at Lentune Mortgage Consultancy, said since the amendments to taxation for landlords were announced he had seen a big downturn in enquiries for buy-to-let purchases.

He said: “Those we have received have been related to limited company buy-to-let, which does indicate a shift of opinion.

“However, the biggest issue will be as, and when, the landlords’ accountants raise the onward issue of the new taxation – we fully expect to see some more existing landlords to thin out their portfolios, which will of course increase the property supply potentially for first-time buyers.”

But Andrew Turner, chief executive at buy-to-let broker Commercial Trust, has advised to ignore the “doom-mongers” and stressed the buy-to-let market was thriving.

He said: “It was inevitable that tax changes, which could potentially suppress profitability in the short term, would impact upon the perceived desirability of buy to let investment.”

The changes were expected to be most keenly felt by those with fewer properties, Mr Turner said, because adjusting would be a more painful process for new investors or those with less experience.

He added: “However, the simple fact is that buy-to-let remains a solid investment option, with strong potential for an attractive and profitable return on capital invested.

“Investors should not be deterred – demand for rental housing is stronger than ever, the cost of
debt remains relatively cheap and the housing shortage is likely to continue. Even so, any investment decision requires care and expertise.

“The real story has really not been about buy-to-let becoming unattractive as an investment option.”

Source: FT Adviser