Number of smaller portfolio landlords in the UK is falling
Landlords in the UK are taking major decisions about the number of properties in their portfolios as a result of tax changes which are beginning to bite into their profits.
New research shows that the number of landlords with between six and 20 properties is rising while those with between three and five are falling.
It also reveals that 24% of landlords reported that they had increased rent in the last three months. They also said they were spending an increased proportion of their rental income on mortgage costs, up to 30% of income from 26% at the end of 2017.
The latest private rented sector trends report from specialist lender Paragon shows that those with the larger amount of properties have risen from 35% to 39% while those with three to five homes is down from 26% to 24%.
The firm says that this indicates the potential for a growing polarisation between small scale landlords and those with more substantial portfolios.
Landlords at the top end of the market have also been resizing, with the latest survey recording a fall in landlords with over 50 properties, down from 6% to 4%, and an overall reduction in the average portfolio size from 13.1 to 11.6 properties.
Portfolio resizing appears to be one of a variety of tactics being adopted by landlords to adapt to regulatory and fiscal changes in the buy to let sector, with reductions in portfolio gearing and rent increases also playing an important role, the report says.
Average portfolio gearing which measures the loan to value ratio of a property portfolio, reduced from 35% to 32% compared with three months ago, falling from a peak of 43% in 2012 to hit its lowest level since Paragon’s PRS trends survey began in 2001.
‘Our latest survey demonstrates how tax and regulatory changes are beginning to drive changes in landlord behaviour, with evidence of polarisation between small landlords and those with more substantial portfolios beginning to emerge,’ said John Heron, managing director of mortgages at Paragon.
‘Our own experience highlights that landlords with larger portfolios need access to products that cater for landlords with more complex requirements and broader underwriting expertise, increasing the role for specialist lenders in the buy to let market,’ he added.