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Fewer Landlords But Bigger Portfolios

There are now 220,000 fewer private landlords and close to 160,000 fewer rental homes than in 2017.

The finding comes from estate agent Hamptons International in its latest Market Insight.

It concludes that landlords are leaving the rental market because of a series of tax and regulatory reforms targeting at them.

‘Buy-to-let reached a peak of popularity in 2017, when 2.88m people were landlords. During the 2017-2018 tax year, the phased cuts to landlords’ mortgage tax relief began to bite, compounding the impact of the stamp duty surcharge on second properties that was introduced in 2016.

‘These and other tax changes were designed to eat into landlords’ profits, making it less likely that they would compete with first-time buyers for smaller properties. A tightening of the capital gains tax rules for landlords who have lived in their buy-to-let property at some point, which takes effect in April, is a continuation of this policy’.

There are signs that landlords who want to stay in the market are expanding their portfolios, suggesting the sector may be professionalising, said Hamptons. Some 30 per cent of landlords now own more than one property – double the percentage in 2011. The average landlord now owns 1.93 homes.

Departure of landlords is shrinking the private rented sector and rents are continuing to rise. Over the past 12 months, the average rent in Great Britain has risen by 3.6 per cent to £998 pcm, said the firm.

The landlords with the largest portfolios – 2.05 homes on average – are investors in the North East.

Investors in Yorkshire and the Humber and London own an average of 2.03 homes and 2.01 homes, respectively. By contrast, investors in Scotland or Wales are least likely to have big portfolios and own an average of 1.83 homes.

Scotland and Wales are also the regions where rents are growing at the slowest pace.

In January 2019, the average rent in Wales was £652 pcm, it is now £659 pcm, 1.2 per cent higher. In the south west, however, the average has jumped by 6 per cent from £784 pcm to £831 pcm over the past 12 months. In Greater London, there was an increase of 4.1 per cent, from £1,714 pcm to £1,783 pcm. The North is the cheapest place to rent, with a monthly average of £646 pcm, up from £625 pcm.

Source: Residential Landlord

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Landlords reshape portfolios as tax changes start to bite

Landlords have been reshaping their portfolios as tax changes start to bite.

Paragon’s latest research into trends in the private-rented sector found the proportion of landlords who own between six and 20 properties had increased from 35 per cent to 39 per cent.

The research, which was based on interviews with 203 experienced landlords in the first quarter of 2018, also found a drop in the proportion of landlords in the three-to-five property bracket.

This group was down from 26 per cent to 24 per cent and Paragon said this indicated a growing polarisation between small-scale landlords and those with more substantial portfolios.

John Heron, managing director of mortgages at Paragon, said portfolio resizing appeared to be one of a variety of tactics being used to adapt to regulatory and fiscal changes in the buy-to-let sector, with reductions in portfolio gearing and rent increases also playing an important role.

He added: “Our latest survey demonstrates how tax and regulatory changes are beginning to drive changes in landlord behaviour, with evidence of polarisation between small landlords and those with more substantial portfolios beginning to emerge.

“Our own experience highlights that landlords with larger portfolios need access to products that cater for landlords with more complex requirements and broader underwriting expertise, increasing the role for specialist lenders in the buy-to-let market.”

Landlords at the top end have also been resizing, with the survey recording a fall in landlords with more than 50 properties. This was down from 6 per cent to 4 per cent.

Average portfolio gearing, which measures the loan-to-value ratio of a property portfolio, reduced from 35 per cent to 32 per cent compared with three months ago – falling from a peak of 43 per cent  in 2012 to hit its lowest level since Paragon’s survey began in 2001.

Meanwhile 24 per cent of landlords said they had increased rent in the past three months. They also said they were spending an increased proportion of their rental income on mortgage costs, up to 30 per cent of income from 26 per cent at the end of 2017.

Daniel Hodges, mortgage adviser at Suffolk-based Just Mortgage Brokers, said: “Landlords are now starting to see the impact of the new tax changes that are gradually being implemented and in turn looking to restructure their portfolios.

“Those with the larger portfolios will continue to see property as a solid investment and although restructuring of their portfolios is on the agenda it is perhaps no surprise that this sector of the market has grown.

“Those with the smaller holding will perhaps see the tax changes as a more relevant factor in their finances and the polarisation between these groups is likely one that will continue to develop.”

Source: FT Adviser