Mortgages  

Dented BTL landlord confidence turning the corner: Paragon

Dented BTL landlord confidence turning the corner: Paragon

While confidence remains low among landlords, after recent government interventions in the buy-to-let market, buyers are slowly returning to the market, according to research from Paragon Mortgages.

Following an increase in the rate of stamp-duty payable on buy-to-let purchases, and with a staged reduction in income tax relief available on rental income due start next year, landlord confidence remained low during the first quarter of 2016.

A survey of more than 1,000 private rented sector landlords undertaken by BDRC Continental revealed 41 per cent rated their prospects as being either ‘good’ or ‘very good’, down from 65 per cent during the same period last year.

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Indicating that falling levels of confidence may have stabilised however, the figure is just a 2 per cent fall on the fourth quarter of 2015.

The first quarter this year also saw landlords’ property purchase intentions edge above selling intentions, reversing the situation seen in the fourth quarter, when more landlords were looking to sell property than were looking to buy.

Nearly a fifth indicated that they intend to purchase a property in the coming year, up from 17 per cent in Q4 2015, while 16 per cent stated they intend to sell a property, down from 19 per cent in the previous quarter.

Driving this trend, Q1 2016 saw an increase in tenant demand, with 39 per cent of landlords reporting demand as increasing either slightly or significantly, up from 34 per cent in Q4 2015.

Despite negativity persisting around business expectations over the short-term, rental property as an asset class is still viewed favourably by landlords, with 38 per cent of landlords polled believing the private rented sector to be ‘much better’ than other investment options.

John Heron, director of mortgages at Paragon, conceded that increased stamp duty, as well as reduced levels of income tax relief for landlords due to come into force next April, have undoubtedly impacted landlord sentiment.

“Confidence by some measures is down by around a third when compared to the same period last year. That said, this data does suggest that confidence is stabilising.

“The main driver of this recovery remains, as ever, tenant demand, which has risen in Q1 2016 along with yields. Landlords are clearly taking the view that buy-to-let remains an attractive long-term, demand driven investment, which continues to outperform other asset classes.”

Separately, Paragon has updated its range with a new two-year fixed rate starting at 3.40 per cent, with a 1.50 per cent product fee at 65 per cent loan-to-value for single self-contained units, and a two year fix at 3.75 per cent with the same fee at 65 per cent LTV for HMOs and multi-unit blocks.

The lender also launched three new five-year fixes, starting at 4.20 per cent with the 1.50 per cent product fee at 65 per cent LTV for single self-contained properties – for both individual and limited company landlords.

peter.walker@ft.com