Demand is growing for rental properties

Demand for rental property has grown by a 7.4% against figures issued for last year a recent survey has highlighted.

The problem is now that supply of properties has fallen by 21% in the same period. On average for every quality property available to rent 4 people are in competition for the occupancy.

This situation is causing great concern for prospective tenants across the whole of the UK and especially in the areas bordering London.

On top of all these disturbing figures it is expected that the demand for rental properties is likely to increase well into 2019 and beyond. Facts are young couples are still and are increasingly finding it difficult to raise the deposits necessary to buy their own property.

Demand is growing fast

Despite most landlords being hit by changes to mortgage tax relief, appetite for further investment remains, new research has revealed.

According to the new report, the proportion of respondents looking increase their portfolios has risen from 40% to 58% since November 2018. It is also up on the 41% of landlords that were looking to expand their portfolios a year ago.

Over 200 property investors completed the survey, answering questions on their portfolios and how they were financed. Research found that landlords have been increasingly choosing to fix for five years instead of the more traditional three. This is likely due to ongoing uncertainty in the market which Brexit is causing.

There has been a huge shift in investor preferences, with five-year fixed rates now the preferred option for 48% of landlords, up from 38% which is quite dramatic. Three-year fixed rates are now less popular even than 10-year fixes, being chosen by just 5% of respondents.

2019 will be the year for limited company and buy-to-let

Research shows lenders are expanding their product range for buy-to-let limited company mortgages. This has come about since the announcement of the tax changes landlords now are facing.

Limited company buy-to-let mortgages now account for nearly 28% of all products on offer. Not all lenders offer buy-to-let mortgages to limited companies, but we can confirm this is changing all the time. More lenders are recognising limited company business is going to become a great deal more popular than years gone by.

The cost of a limited company mortgage is on average 0.7% higher than the normal product plus some set-up fees are higher as well. Most of the fees payable are on a percentage basis and range from 0.5% to 1.5% and an investor should be very careful of their choice.

Landlords looking forward

As 2019 gets underway, and economic conditions continue to be uncertain, it is important for buy-to-let investors to be on top of the market and its changes.

The past three years have seen the market face a host of new regulations and tax changes, and this year is set to be no different as buy-to-let landlords must brace themselves for further uncertainty. However, it’s not all bad news – some of the changes are set to have a positive impact on the market, and there are still plenty of landlords planning to increase their property portfolios over the coming 12 months.

Tax reforms have been unkind to the buy-to-let market, with landlords only able to claim 25% of their mortgage tax relief, when filing their taxes between April 2019 – 2020. This is down from 50% for the previous tax year. Not only will this increase tax bills, but it could also mean that some landlords who are currently paying basic rate tax find that they are pushed into a higher rate band.