Despite the majority of buy-to-let landlords making a profit from their investment portfolios, a new report suggests that buy-to-let investment is actually at an all-time low.
The report from Armistead Property indicates that 84% of landlords are making a profit from their lettings activity. 44% rate their expectations of their portfolio as good or very good for the next three months.
However, 83% of buy-to-let landlords said that they have found obtaining buy-to-let finance more difficult in the last six months. 16% of landlords intend to purchase at least one more property during the next year – which is an all-time low.
This slowdown in buy-to-let investment is also evident in the mortgage recent mortgage figures, with lenders recording a 42% drop in loans to landlords as tax changes begin to take their toll.
The Council of Mortgage lenders said that in March 2017, lending totals stood at £21.4bn – down 19% year-on-year. This is nearly almost entirely due to buy-to-let landlords exiting the market due to tax and lending changes making the sector less attractive than in previous years.
Peter Armistead, Director of Armistead Property, observed: ‘Britain’s two million landlords are facing assaults from both the taxman and the Bank of England. Many landlords are being forced to put a hold on expanding their portfolios, due to the tougher mortgage criteria for BTL loans. The mortgage restrictions are very bad for landlords and pose a major threat to BTL investments.’
‘For those landlords that can secure mortgages, they may experience falling yields and monthly profit margins will be squeezed. Now more than ever, investors need to make sure they have a solid business plan which is risk management focused,’ he continued.
Mr Armistead went on to say: ‘Investors need to carefully assess any purchases and make sure the properties they already own are operating very efficiently. If a property is under-performing, then there are a few things to consider, such as managing the property yourself, rather than using an agent; ensuring all the maintenance is up to date; and carrying out renovations to improve the yield.
‘If investors are acquiring buy-to-let properties, it is vital that they purchase below market value in the right area. This may mean taking on properties that require refurbishment. As long as all the refurb costs have been accurately factored into cashflow with a contingency budget, then investors have the potential of higher yields on ‘nearly new’ properties,’ he concluded.