Landlords in the UK still have confidence in the buy to let market but almost half are taking a more cautious approach, the latest annual survey of the industry has found.
Many are adopting a wait and see approach as they reflect on recent Governmental and regulatory changes and assess how the market adapts to Brexit uncertainty before making further purchases, according to Shawbrook Bank’s latest buy to let barometer.
The annual survey reveals the biggest challenges facing investors over the next six months. Some 22% of landlords says it is regulation, 21% interest rate movements and 16% lending restrictions.
When it comes to regulatory challenges, the change that has most affected landlords is the reduction on the tax relief for buy to let mortgages, with 52% saying this had the biggest impact.
This has increased from last year’s results where 35% said this had affected them most. Landlords say the 3% extra stamp duty levy was the second biggest regulatory change that has had an impact, with 21% feeling the effect of this.
To counteract the changes, some landlords are looking for ways to protect their portfolios. Some 33% of landlords have already, or are planning to, set up a limited company whilst 18% intend to re-mortgage and 19% are looking to sell their property/properties.
In comparison, to prevent the impact of the regulatory changes, 49% of landlords say they are going to wait and see what happens over the next six to 12 months before they put any measures into place.
‘Stricter affordability tests for portfolio landlords and interest rate rises will make it harder for some to get funding and this month will also see the next phase of reductions in tax relief for buy to let, further hitting landlords’ profits,’ said Karen Bennett, managing director of Shawbrook Bank Commercial Mortgages.
‘It is encouraging to see professional landlords adapting their strategy in line with regulatory change, thereby helping to ensure the long term sustainability of the industry. We have seen a slight cooling as landlords evaluate their options, not rushing into purchases and holding existing property,’ she pointed out.
‘It is important to recognise however, that buy to let remains a crucial component in the wider UK housing landscape, and data suggests that although investors may tread carefully throughout 2018, they retain confidence in the fundamentals of this market,’ she added.
