Buy-to-let investors have suffered a few heavy blows of late, and this is of course affecting the nature of the market. Of course, in April 2016 investors were hit with another 3% stamp duty. This move was followed by the gradual reduction of mortgage interest relief from 45% to the basic rate of tax, this commenced in April 2017. For this reason, the large majority of investors purchase via a limited company. Mortgages for Business found that in the third quarter of 2017 79% of buy-to-let mortgage were taken through a limited company. Of course, these purchases are still liable to pay corporation tax, but this is lower than the higher rate of income tax.
The downside to buying via a limited company is that there are fewer lenders and fewer products available and as stated by ‘The Index’ the rates available are “still somewhat above the market average”. Private Finances highlighted the fact that only landlords with four or more properties would benefit from using a limited company due to the higher interests.
Recently the private rental sector has been showing signs of slowing down, with the number of properties per letting agent falling to a 12-month low. David Cox, ARLA chief executive stated that: ‘A lot rentals are agreed in the New Year and if stock remains low, competition for properties among prospective tenants will increase, which will in turn push rents up, so we must see an increase in supply over the next two months.’
Figures from ARLA (Association of Residential Letting Agents) also show that the number of tenants experiencing rent increases has reduced from 35% in August, and 27% in September to just 22% in November, which is of course good news for tenants. But if stock levels remain low this trend will be reversed in 2018.