Landlords are increasingly looking to upgrade their property portfolios rather than buying new properties, according to a recent report.
Paragon Mortgages interviewed more than 200 landlords and they say that in the first three months of this year, the number of landlords intending to buy new properties fell. Indeed, just 9% of landlords said they were looking to buy a rental property in the coming three months, that's a fall from 14% seen in the last quarter.
Paragon says this fall coincides with rising levels of awareness among landlords about the tax relief changes and their implications.There's been a big increase in the number of landlords who say they now appreciate the changes to tax relief and the impact on their business - it's a rise from 62% to 76%.
Landlords looking to improve their credit profile
In addition, landlords say they are also looking to improve their credit profile with the average level of gearing, that is the value of a landlord’s investment portfolio against their outstanding mortgages, falling to 36% from 38%.
John Heron, a director at Paragon, said: “The private rental sector is facing a great deal of change and some landlords are responding by planning fewer purchases but looking to invest in their existing portfolio.”
He added that the credit profile for landlords are improving which is 'at odds' with the picture being painted by some.
Mr Heron also pointed out that if landlords are being discouraged from investing in property, it may make renting a home more expensive as well as more difficult for tenants.
'Rush to let' brings financial bonus for landlords
Meanwhile, the recent ‘rush to let’ which saw landlords snapping up homes in a bid to beat the stamp duty hike has lead to an unexpected boost to the returns for landlords with a subsequent rise in property prices.
Your Move and Reeds Rains says that annual returns have now been pushed to 12.2% after the flurry of buy-to-let property interest in March. That's an increase on the 10.7% figure seen in the year to February, and it's also the fastest increase for landlords since November 2014 when annual returns were predicted to be 12.3%.
Average landlord has seen a return of around £22,135
The data reveals that before any deductions have been made, such as market repayments and property maintenance, the average landlord has seen a return of around £22,135 over the past year.
Capital gains contributed an average of £13,494, with rental income contributing £8,641. A director of Your Move, Adrian Gill, said: “With the scramble to buy property means the interest from property investors has boosted values and delivered faster capital growth which is a bonus for existing landlords.”
