Buy to let portfolios set to expand despite tax obstacles, claims broker

No fewer than 44 per cent of landlords plan to expand their portfolios before July 2018 despite tax obstacles, according to a survey by a specialist mortgage brokerage.

Mortgages for Business says that when asked what types of property they intended to purchase as part of their expansion strategy, 75 per cent of landlords who responded said that vanilla buy to let would form part of the mix. 

HMOs - known to produce the highest yields, often close to 10 per cent - were also cited as a preferred option.

On the downside, however, there was an increase in the number of landlords who said that they intended to reduce the size of their portfolios in the next six months as a direct result of the tax changes - that applied to 15 per cent of respondents, up from nine per cent in the brokerage’s last survey. 

“The results show that many landlords are more optimistic about the future of property investment than some commentators would have you believe” says Steve Olejnik, chif operating officer at Mortgages for Business.

Limited companies as borrowing vehicles were the popular choice for those expanding their portfolios with 58 per cent of applicants opting for this route and a further 20 per cent advising they would be purchasing both personally and via a corporate structure.   

Some 48 per cent suggested that they had not been affected by either the new affordability calculations nor the specialist underwriting approach which were introduced by lenders last year in response to guidelines issued by the Prudential Regulation Authority. 

The brokerage says this might be because some landlords have not yet applied for finance since the guidance was introduced or they have their financial affairs in order so do not see the new policies as a major hindrance.

“What’s really happening is the market is getting far more specialised. Portfolio landlords are coming to the fore, as fewer people are getting into buy to let as an alternative pension strategy. The role of the broker will grow as lenders increasingly rely on them to help landlords understand the changing environment and prepare the paperwork that is now required when applying for a mortgage” says Olejnik.

The survey was carried out over a two-week period in December 2017, having been sent to MFB clients and advertised across social media and landlord forums. A total of 254 property investors completed the survey.