Landlords are shifting investment away from buying new property and towards the upgrading of existing portfolios following the stamp duty increase.
According to the latest Paragon Mortgages Private Rented Sector Trends report, the number of landlords looking to buy was 9%, down from 14% in the previous quarter.
This reduction also coincides with a rising level of awareness about the implications of the tax relief changes. More than three quarters (76%) of respondents said they now understand what the changes to tax relief will mean for them, up from 62% in in the final quarter of 2015.
Affordability levels are also improving with landlords spending, on average, 28% of their rental income on mortgage repayments, while more than half of all respondents (51%) spend less than a quarter of their rental income on mortgage repayments.
The latest data also indicates that landlords are considering upgrading existing portfolios. Asked whether, as a consequence of reduced tax relief on rental income, landlords would reduce maintenance of their properties, just 12% said they would – down from 25% in the last quarter 2015.
On the question of whether landlords would make fewer improvements to their properties, just 14% said they would make fewer improvements, a figure more than halved since the previous quarter when it stood at 31%.
John Heron, director of mortgages at Paragon, said: “The private rented sector is facing the prospect of a great deal of change as a result of the significant shift we have seen in fiscal and regulatory policy. Some landlords are responding to this uncertainty by planning fewer new purchases and investing in their existing portfolios. At the same time credit profiles are very robust and improving, a picture that is somewhat at odds with the picture being painted in some quarters.
“If landlords materially reduce investment, those that have to rely on the private rented sector for a home could be hit quite hard. It may well become even more difficult and expensive to rent a home with no obvious commensurate benefit to homeowners.”
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