1st April 2016
Some 41% of private landlords are considering setting up as limited companies in a survey of 1,400 landlords.
The stamp duty tax and tax relief regime has become progressively tighter in the last few years.
The survey carried out by BDRC Continental on behalf of Paragon Mortgages shows that 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.
Demand for rented property in the fourth quarter of 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 or 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, 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.”