Are landlords buying more properties?

Despite expectations of a mass exodus from the rental market, many landlords are planning on buying even more properties to expand their portfolios, according to the latest Landbay landlord survey.

However, brokers have conflicting views as to whether this survey is representative of what is being seen on the ground.

Difference between plan and able

Michelle Lawson (pictured), director at Lawson Financial, said there is a difference when asked a question about if you ‘plan’ to do something and if you are ‘able’ to do something.

“I am sure landlords are ‘planning’ to buy more properties, particularly as prices do seem to be adjusting, however, the reality that should not be ignored is if they are ‘able’ to obtain the finance due to rental coverage,” she said.

Lawson said lenders are reducing rates to help – however, the trade-off is a high arrangement fee which most add to the mortgage. While this does have its tax benefits, she said if the property’s value falls, and the mortgage is maxed out, this could cause issues later when the mortgage product expires.

“It is important for buy-to-let customers to consider the lender offering at the end of the product as well,” Lawson said.

Stephen Perkins, managing director at Yellow Brick Mortgages, believes the Landbay survey is not representative of the landlord market as a whole.

“While landlords can still make margins work on Houses in Multiple Occupation (HMO) properties and holiday-lets, where rents are higher; most standard residential landlords will be giving serious thought to downsizing their portfolios as the rents are not keeping up with their rising mortgage costs as their deals come to an end,” he said.

Perkins added that remortgaging to another lender is near impossible for most landlords due to the high stress tests being failed by the non-adjusted rental income, meaning a forced product transfer, or looking to sell the property.

Larger-scale landlords, and those with unencumbered properties, he said, can play the averages and may look to expand if there are good deals to be had from landlords keen to sell. However, Perkins said many everyday landlords have seen margin evaporate with increased mortgage rates and the government’s continued taxation over recent years.

Opportunity to buy

Russell Maggs, mortgage and protection adviser at Maggs Financial Services, said buy-to-let landlords interested in investing for capital appreciation will continue to invest.

“There is an opportunity for many to take properties with lacklustre Energy Performance Certificates (EPC) ratings and improve the home, adding value,” he said.

Maggs added that investing in property for cashflow reasons will take a brief pause in the present climate, but he believes those with the money to invest will do so to diversify their portfolio and reduce their overall risk in the longer term.

Joe Stallard, director and adviser at House and Holiday Home Mortgages, meanwhile, said with reports of landlords selling up and leaving the market, properties are up for grabs.

“Therefore, some professional landlords will be taking the opportunity to expand their portfolios; and this might be a good thing in terms of a recent tightening of regulations and rules around EPC ratings,” he added.

Stallard said those who are serious about property are more likely to be quality landlords, providing quality housing for those that either cannot yet, or do not want, to buy.

Finally, Elliott Culley, director at Switch Mortgage Finance, said landlords with established portfolios are seeing an opportunity to purchase property at lower prices, taking advantage of smaller landlords exiting the market and first-time buyer interest cooling with current rate rises.

“They have greater flexibility to raise funds on their existing portfolios, which makes it easier to buy property in the current market,” Culley said.

Have you seen buy-to-let landlords purchasing more properties? Let us know in the comment section below.