Despite what has been widely perceived as an attack on landlords by the government in the form of tax hikes and restricting new legislation, a new report from specialist bank, Aldermore, has revealed that many private landlords are feeling positive about the future of the market and the opportunity it presents
Aspirations of Britain’s private landlords
Predictions that the market will shrink are being countered by the beliefs of around 44% of landlords who are certain that the private rental sector will actually grow. For example, one in six (or 17%) are hoping to expand their own buy-to-let portfolio over the next year. Amongst ‘portfolio landlords’ (those with at least four properties), over two-fifths (41%) are in a position to expand their portfolio over the next year.
Many of those who are looking to expand are doing so because they still see the rental market as a good investment opportunity, with yields far outpacing current savings rates. Many also acknowledge the opportunity, with the increasing demand for rental properties particularly amongst millennials, many of whom cannot afford to get on the property ladder.
Just less than one in ten (8%) of private landlords intend to reduce the number of properties they own. This is predominantly due to ongoing government actions. When asked, many cited too many restrictions and higher taxes while some believe that tenants are protected to the detriment of the landlord.
Charles McDowell, Aldermore’s Commercial Director, Mortgages comments: “There is no denying that the buy-to-let market has taken a bit of a battering, thanks to a multitude of regulatory, underwriting and tax changes. However, we are pleased, and slightly surprised to see, that there remains a net sense of optimism amongst buy-to-let landlords. Despite the recent 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.”
Challenges within the market
Even though many landlords do have a positive outlook, they acknowledge the challenges facing the private rental sector. One in four (25%) state the changes in tax relief as their main concern, while one in five (22%) believe it is increased stamp duty and one in seven (15%) chose the growing pressure on yield. A further one in seven (14%) believe it is a pressure on rent and over one in 10 (11%) say there’s increased competition in the market which is proving challenging. When asked how they intend to deal with these challenges, one in six (17%) say they will increase rents to cover the higher costs, while a further 17% will sell some of their properties. One in 10 (10%) will reduce the value of their buy-to-let mortgages so they are borrowing less.
One in seven (15%) landlords who are not expanding their portfolio are planning to remortgage some or all their properties. The main reason is to mitigate any interest rate rises (40%), while one in four (27%) want to unlock capital and 25% say they are not satisfied with their current lender.
Charles concluded: “Our research has highlighted that whilst landlords are weathering the storm of change, policy makers need to shift the spotlight away from the market. There has been a multitude of changes to the market in quick succession, with little time for them to bed in properly. Until the dust settles we’re unlikely to see the full impact on the sector and the ramifications for the future.”