Private landlords are feeling positive about the future of the market, despite the past two years being rife with changes in the buy-to-let market, according to a new report from Aldermore.
Despite predictions the market will shrink, 44% of landlords believe the private rental sector will grow, with 17% hoping to expand their own buy-to-let portfolio over the next year. Amongst ‘portfolio landlords’ (those with at least four properties), 41% are in a position to expand their portfolio over the next year.
Aldermore said 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.
Only 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 for mortgages, said: “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.”
Even though many landlords do have a positive outlook, they acknowledge the challenges facing the private rental sector. 25% state the changes in tax relief as their main concern, while 22% believe it is increased stamp duty and one in seven (15%) chose the growing pressure on yield.
A further 14% believe it is a pressure on rent and 11% say there’s increased competition in the market which is proving challenging. When asked how they intend to deal with these challenges, 17% say they will increase rents to cover the higher costs, while a further 17% will sell some of their properties. 10% will reduce the value of their buy-to-let mortgages so they are borrowing less.
15% of 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 27% want to unlock capital and 25% say they are not satisfied with their current lender.
McDowell added: “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.”