Private landlords are feeling positive about the future of the market, and the opportunity it presents, a report from specialist bank Aldermore found.
Despite predictions the market will shrink, almost more than two in five landlords (44%) believe the private rental sector will grow, with one in six (17%) hoping to expand their own buy-to-let portfolio over the next year.
Amongst ‘portfolio landlords’ (those with at least four properties), over two-fifths (41%) are in a position to expand their portfolio over the next year.
Charles McDowell, Aldermore’s commercial director, mortgages, said: “There is no denying that the buy-to-let market has taken a bit of a battering, thanks to a multitude of regulatory, underwriting and tax changes.
“However, we are pleased, and slightly surprised to see, that there remains a net sense of optimism amongst buy-to-let landlords.
“Despite the recent changes, many still view buy-to-let as a good investment, with expansion on the horizon, particularly amongst those who are specialists in this area.”
Many of those who are looking to expand are doing so because they still see the rental market as a good investment opportunity, with yields far outpacing current savings rates.
Many also acknowledge the opportunity, with the increasing demand for rental properties particularly amongst millennials, many of whom cannot afford to get on the property ladder.
Less than one in 10 (8%) of private landlords intend to reduce the number of properties they own.
This is predominantly due to ongoing government actions. When asked, many cited too many restrictions and higher taxes while some believe that tenants are protected to the detriment of the landlord.
Even though many landlords do have a positive outlook, they acknowledge the challenges facing the private rental sector.
One in four (25%) stated the changes in tax relief as their main concern, while one in five (22%) believe it is increased stamp duty and one in seven (15%) chose the growing pressure on yield.
A further one in seven (14%) believe it is a pressure on rent and over one in 10 (11%) said there’s increased competition in the market which is proving challenging.
When asked how they intend to deal with these challenges, one in six (17%) said they will increase rents to cover the higher costs, while a further 17% will sell some of their properties. One in 10 (10%) will reduce the value of their buy-to-let mortgages so they are borrowing less.
One in seven (15%) landlords who are not expanding their portfolio are planning to remortgage some or all their properties. The main reason is to mitigate any interest rate rises (40%), while one in four (27%) wanted to unlock capital and 25% say they are not satisfied with their current lender.
McDowell added: “Our research has highlighted that whilst landlords are weathering the storm of change, policy makers need to shift the spotlight away from the market.
“There has been a multitude of changes to the market in quick succession, with little time for them to bed in properly. Until the dust settles we’re unlikely to see the full impact on the sector and the ramifications for the future.”