Sector professionalisation and out-of-city yields will sustain BTL lending – Gee

Of course, there is still a partial saving to be made for those purchasers completing before the end of September. I suspect while some transactions would have been aborted as a result of not hitting the first deadline, others will be continuing with the intention of completing before the end of September. 

The decision to include landlord purchasers in the group who could benefit from the reduced stamp duty charge undoubtedly acted as a catalyst in terms of purchase activity in the last six to 12 months.  

Landlords still purchasing 

As a buy-to-let lender we certainly saw the results of this decision, however there is also plenty of evidence to suggest landlords are not going to pause purchasing just because the reduced stamp duty period is coming to an end.  

Far from it.  

Recent results from the latest BVA BDRC research amongst landlords reveals that, although the proportion of landlords intending to buy over the next 12 months has fallen from its four-year high of 19 per cent in the first quarter, it has only dropped slightly to 14 per cent.

And these 14 per cent who say they are intending to buy are looking to acquire an average of 1.9 properties each. 

You can see therefore that many landlords plan to continue their purchase activity, and there are certain regions in the country – namely the South East and South West – which, according to the research, are most likely to see purchases in the next year.  

Decision-driving trends 

This may indicate that landlords active in these regions are responding to two separate – but related – themes.  

Notably, a move out of larger cities to areas of the country which may provide more space and do not necessarily have to be within commutable distances, and secondly, if this is also a response to the growth in people wanting or having to holiday in this country, as a result of the measures currently in place. 

Certainly, landlords appear to want to add to portfolios on an ongoing basis, and they will need to take these sorts of demand-driving factors into account when it comes to purchasing the right property which can benefit from strong tenant demand, rental yield and eventually, capital growth.  

Portfolio landlords are tending to lead the way in this respect, especially those who may prefer a shorter fixed-term or are looking to borrow against a specialist property type.  

We tend to hear a lot from portfolio landlords about their focus on keeping upfront costs to a minimum, so products with ‘no fee’ options or free standard valuations are seeming to be the main preference. 

Sector professionalisation 

Overall, we also continue to see the move towards the use of limited companies by portfolio landlords.  

In the BVA BDRC research, the number of landlords intending to purchase their next property within a limited company vehicle grew to 51 per cent, up four per cent on the first quarter, and for those who own 11-plus properties that number rises to 67 per cent.  

Overall, 16 per cent of all landlords have at least one property held within a limited company and for those landlords that do have at least one in this structure, 66 per cent of their portfolio is held like this. This is up from 48 per cent a year ago.  

It is clear the professionalisation of buy-to-let continues apace and both advisers and lenders will need to keep on adapting and responding to it.