The mortgage broker’s latest Property Investor Survey found 44% of landlords were planning to expand their portfolios before July 2018 – despite most understanding that they will be affected by the changes to income tax liability.
The results come as figures from the Intermediary Mortgage Lenders Association (IMLA) revealed that BTL investments have dropped 80% since 2015 following tax changes.
According to the IMLA data, BTL investment had fallen from £25bn in 2015 to £5bn in 2017.
Reflecting this trend, respondents’ expectations in the Mortgages for Business survey for the market in 2018 were lukewarm: 57% of landlords thought the market would be flat, 18% thought they would see declines, while only 25% believed it would grow.
The survey was carried out over a two-week period in December where 254 property investors answered questions on their portfolios and financing details.
However, although 44% of respondents anticipated portfolio expansions – there was also an increase from 9% to 15% of landlords who said they intended to reduce the size of their portfolios in the next six months – as a direct result of the tax changes.
Mortgages for Business added that a remaining 41% of respondents who said they would do nothing – against the 15% expecting reductions and 44% expansions in their portfolios – “demonstrates that an element of wait and see still exists among landlords”.
Despite 48% of respondents saying that they had not been affected by either the new affordability calculations, or the specialist underwriting approach introduced in response to portfolio lending guidelines, Steve Olejnik (pictured), chief operation officer at Mortgages for Business, said this might be because some landlords have not yet applied for finance since the rules changes.
“What’s really happening is the market is getting far more specialised. Portfolio landlords are coming to the fore, as fewer people are getting into buy-to-let as an alternative pension strategy,” said Olejnik.
Indeed, 54% of landlords in the survey said they had not taken professional advice about the income tax changes.
He continued: “The role of the broker will grow as lenders increasingly rely on them to help landlords understand the changing environment and prepare the paperwork that is now required when applying for a mortgage.”
Of those respondents looking for portfolio expansion, 75% said that vanilla BTL would form part of the mix.
Limited companies were identified as preferred borrowing vehicles, with 58% of those expanding their portfolios to use this channel, and a further 20% saying they would combine corporate structure with personal purchase.
“The results show that many landlords are more optimistic about the future of property investment than some commentators would have you believe,” continued Olejnik.
“Of course, there will be some who will choose to leave the sector, but this will create opportunities for those who are in it for the long-term,” he added.