Increasing numbers of landlords are considering moving their property investments into limited company vehicles.
That’s the verdict from a survey of nearly 1,400 Private Rented Sector (PRS) landlords undertaken by BDRC Continental on behalf of Paragon Mortgages, as landlords plan for the increased rate of stamp duty on buy-to-let purchases and cuts to landlord tax relief which can into effect today.
Of landlords surveyed, 41% indicated that they are considering moving their portfolio into a limited company following the Chancellor’s decision to limit tax relief available to landlords last year. A further 5% have already established limited companies. For larger landlords with 20 or more properties, 14% are already operating as limited companies, while 63% are considering it.
In terms of portfolio growth, 43% of landlords surveyed agreed that the stamp duty increase will affect their buy-to-let purchasing plans over the next couple of years. This figure rises to 63% for larger landlords with 20 or more properties.
Despite uncertainty about what impact the changes to tax relief and stamp duty might have however, tenant demand amongst landlords is still perceived as being high. Demand for rented property in Q4 2015 was strongest in the South West where 40% of landlords reported demand to be rising. Landlords in the North East experienced the weakest demand, with just under a quarter (24%) of landlords reporting increased demand.
Reflecting this demand, average yields have also remained stable and averaged 5.6% across the country – unchanged on the previous quarter. The North West saw the highest yields, at 6.2%, while outer London had the lowest, at 5.1%.
John Heron (pictured), director of mortgages at Paragon, said: “Recent government interventions into the buy-to-let market are now beginning to impact landlord sentiment and plans. The fundamental drivers of the market however – tenant demand and yields – remain strong so there are competing dynamics at play.
“It is interesting to see that concern about the impact of changes to stamp-duty and tax relief is greatest among larger landlords. This concern is likely to grow now that the government have confirmed that landlords with larger portfolios will have to pay the increased rate of stamp duty on buy-to-let purchases.”
