A
survey of nearly 1,400 private rented sector landlords undertaken by BDRC
Continental on behalf of Paragon Mortgages has revealed that increasing numbers
are considering moving their property investments into limited company
vehicles.
The
move comes as landlords plan for the increased rate of stamp duty on buy-to-let
purchases and cuts to landlord tax relief.
Of
the landlords surveyed, 41% indicated 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.
Despite uncertainty about what impact the changes to tax relief and stamp duty
might have however, tenant demand amongst landlords is still perceived as being
high.
Demand
for rented property in Q4 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 (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.”
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