Tax changes prompt major shift in landlord portfolio sizes

by Gary Whittaker

The size of landlord portfolios has shown significant change in the wake of a series of tax and regulatory changes imposed by the government over the past couple of years. 

Paragon Bank's latest private rental sector (PRS) trends survey, based on interviews with just over 200 experienced landlords on the first quarter of 2018, found that there was a fall in the number of landlords with between three and five properties. 

At the same time, the proportion of landlords who own between six and 20 properties has increased from 35 per cent to 39 per cent. 

This middle-sized portfolio group did not just increase relative to the rest because of the reduction in small portfolio holders, as the number of landlords with more than 50 properties was also down. This group dropped from six per cent of the total to four per cent. 

Across the PRS industry as a whole, the average portfolio fell from 13.1 to 11.6 properties.

At the same time, the survey showed that property gearing had fallen. The loan-to-value ratio of the average property portfolio was down from 35 per cent three months ago to 32 per cent, the lowest figure since the survey began in 2001. This contrasts with the highest ever figure in the survey, a ratio of 43 per cent in 2012.

The typical landlord was spending 30 per cent of rental income on mortgage costs, up from 26 per cent on the fourth quarter of 2017. Almost a quarter had put rents up in the first three months of the year. 

Commenting on the survey, managing director of mortgages at Paragon John Heron said:  "Our latest survey demonstrates how tax and regulatory changes are beginning to drive changes in landlord behaviour, with evidence of polarisation between small landlords and those with more substantial portfolios beginning to emerge."

Changes to the tax regime included the imposition of an additional three per cent stamp duty charge on those purchasing buy-to-let properties from April 2016.

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20-April-18General Lettings News