Buy-to-let landlords slash investment plans

The number of landlords planning to buy a new buy-to-let property has dropped by a third since the stamp duty surcharge kicked in on 1 April.

Just 9% of landlords plan to buy a property over the next three months, down from 14% in the previous quarter.

Rather than making new acquisitions many landlords are now concentrating on upgrading their existing portfolios.

The latest private rented sector trends report from Paragon Mortgages, based on interviews with a panel of more than 200 landlords, also showed that landlords are also improving their credit profiles.

Average levels of gearing – the value of an investment portfolio less existing outstanding mortgages – fell from 38% in the final quarter of 2015 to 36% today.

Two thirds of landlords surveyed now have borrowings of less than half the value of their investment property portfolios.

Affordability levels are also improving with landlords typically spending 28% of their rental income on mortgage repayments, while more than half spend less than a quarter of their rental income.

Returns are stable with the average net rental yield remaining at 4.7% for the third consecutive quarter.

John Heron, director of mortgages at Paragon, said the private rented sector is facing a great deal of change.

“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.”