Buy-to-let investors target new 'complex' strategies

It has been just over two months since buy-to-let landlords were hit with unreasonable tax changes designed to deter them from investing in property, and yet early signs are that despite the alterations which will see landlords’ profits take a significant hit, property investors remain resilient and optimistic about the future of buy-to-let.

With tenant demand continuing to outstrip housing supply, a number of landlords are planning to add to their UK property portfolios by purchasing homes across the country, but it would appear that many are looking to do so by acquiring more complex property types.

Houses in Multiple Occupation (HMO) are looking particularly attractive to landlords at the moment, with 28% of those looking to expand their property portfolio considering purchasing HMOs, up from just 10% six months ago, according to Mortgages for Business.

“With higher yields it is no surprise that there has been a sizeable shift towards the more complex property types,” said David Whittaker, managing director at Mortgages for Business.

The number of investors looking to expand their portfolio has dipped slightly to 41% from 46% in November 2015, largely due to the tax change announcement and the introduction of the 3% stamp duty surcharge. However, a smaller proportion of just 14% plan to shrink their portfolios, down from 18% in November 2015.

Whittaker continued: “It is positive to see that fewer landlords are looking to sell property and shrink their portfolios and that a large proportion [of investors] are still seeing the benefits of remortgaging.

“After the government’s tax crackdown on private landlords I can understand why investors are being more cautious about expansion. It will be interesting to see how long this cautious approach will last.”

Since the mortgage tax relief announcement, Mortgages for Business has seen a notable rise in limited company applications, which does not appear to show any sign of slowing down.

Some 30% of respondents said they owned a property in a limited company vehicle up from just 22% a year earlier.

“We expect this figure to continue to rise in light of the pending tax changes which will peg relief on finance costs, including mortgage interest, to the basic rate of 20% to individual tax payers, Whittaker added. 

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