BTL Market review summary from Kent Reliance

BTL mortgage Lenders
• Stock of outstanding BTL mortgages continues to
grow, albeit slowly, up 1.5% year on year
• BTL house purchase remains subdued on the back
of regulatory and tax changes
• Remortgaging performs more strongly, up 13%
year-on-year
• 34% of landlords are concerned over ability to
secure new deals when they remortgage following
PRA changes

Professional Landlords

So Professional landlords grow in prominence as
demand for limited companies climbs
At the same time as confidence has stabilised,
professional landlords are playing a greater role in
the market.

31% of landlords now make a profitable,
full-time living from property investment, compared to
26% three years ago. The larger a landlord’s portfolio,
the more likely he or she is to be professional; among
landlords with 20 or more properties, three quarters
now make a full-time living from the PRS.

Profitability will come under greater pressure this year
and the next, with just 50% of mortgage interest tax deductible
this year, falling to 0% in 2020, when it will
be replaced with a basic-rate tax deduction.

Higher rate tax payers

and For thosehigher-rate taxpayers with highly geared portfolios
held in their own name, higher income taxes will weigh
on their returns (as we detail in our recent Landlord
Profitability report).

So Consequently, thousands of landlords have already
purchased properties through limited companies, or
transferred existing portfolios into these structures
to insulate themselves. In doing so, they are able to
continue to offset mortgage-interest costs against tax
and incur the lower rate of corporation tax, rather than
the income tax rate.

And Kent Reliance’s data shows that in the first quarter of
2018, 72% of BTL purchase applications were through
a limited company. This is more than twice the level
seen two years ago, and up slightly from the 70% of
applications in 2017.
A third of landlords surveyed have already taken steps
or are considering moving their portfolio into a limited
company or transferring property to a spouse. This
is a far more common approach with larger-scale
professional landlords; 56% of those with 20 or more
properties have either taken this course of action, or
plan to do so in the future.

 

 

BTL Market Overview
• PRS sees growth slow as government intervention
and economic uncertainty bite
• The number of households climbed by just 3%
annually, below historic trend
• as such Falling house prices have halted growth in the
sector’s value in last quarter, but the PRS is still
worth £72bn more than it was a year ago
• Landlords perceive tenant demand to be weakening
in short term, but frustrated first-time buyer
demand will sustain sector’s long-term growth
• First-time buyers faced a lost decade with two
million fewer buying homes in last ten years than
before the recession
• And Despite modest recovery, nearly 100,000 fewer
buyers purchased their first home last year
compared to pre-recession level
• SoWithout a sustained recovery in numbers, the next
ten years will see 940,000 fewer first-time buyers
than the 10 years before 2008, amounting to a
second ‘lost decade’

Landlords

• Landlords’ confidence stabilises with 41% positive
about their portfolio’s prospects and confidence
higher among large-scale landlords
• Professional landlords grow in prominence with 31%
making a full-time living from portfolio
• Limited company lending now accounts for 72%
of BTL house purchase applications, up from 70%
in 2017
• Yields show signs of recovery as house prices
weaken and rents rise in last quarter
• Average rents climb by 1% to £898pcm, with
landlords receiving a total of £60.6bn in rent
last year