Sizeable shift towards complex property types
Property investors looking to expand their property portfolios are looking to do so with the purchase of complex property types. In particular 28% of those looking to expand said they were considering purchasing HMOs, up from just 10% six months ago. Commercial and semi-commercial property have also piqued the interest of investors. Those looking to purchase vanilla property has fallen slightly to 79% from 83% in November.
David Whittaker, managing director at Mortgages for Business, said:
“With higher yields it is no surprise that there has been a sizeable shift towards the more complex property types. The interest in commercial and semi-commercial property may have also grown as these asset classes do not incur the stamp duty surcharge imposed on residential property.”
The number of investors looking to expand their portfolio has dipped slightly to 41% from 46% in November 2015, probably due to the tax change announcement and the introduction of the 3% stamp duty surcharge. The good news is that an even smaller proportion (14%) plan to shrink their portfolios, down from 18% in November 2015.
Despite an increase in investors keeping their portfolio size as it is now, 39% still plan to remortgage some of their properties in the next six months.
“It is positive to see that fewer landlords are looking to sell property and shrink their portfolios and that a large proportion are still seeing the benefits of remortgaging.
“After the government’s tax crackdown on private landlords I can understand why investors are being more cautious about expansion. It will be interesting to see how long this cautious approach will last.”
30% of respondents said they owned a property in a limited company vehicle up from just 22% a year before.
“We expect this figure to continue to rise in light of the pending tax changes which will peg relief on finance costs, including mortgage interest, to the basic rate of 20% to individual tax payers.
“Since the tax relief announcement we have seen a notable rise in limited company applications, which doesn’t show any sign of slowing down.”
Finally, good news for lenders. 59% of those looking to expand their portfolios will need to refinance to raise the necessary funds, up marginally from 58% in November 2015. There was also a fall in the number of respondents who felt that lenders were not doing enough to support investors.
The most common gripes felt by landlords were extremely similar to the responses given in November’s survey including wanting more lending options for limited companies, wanting the removal of upper age restrictions and wanting more of a human/common sense approach to underwriting.