Money Street News


Record number of buy-to-let limited companies set up in 2023 ‒ Hamptons

Around 50,004 buy-to-let limited companies were set up in 2023, surpassing the previous record of 48,502 in 2022, research has shown.

Hamptons research reveals that in the first half of the year buy-to-let limited companies were two per cent lower than the same period in 2022, partially due to the mini Budget, but as mortgage rates rose limited company incorporations rose in the second half of the year to nine per cent above 2022 levels.

Scotland had the largest increase, with new companies up 8.4 per cent year-on-year.



The South West and North East were the only regions to record a small fall in new buy-to-let limited companies being set up, but the number of homes owned in corporate structure rose.

The report said that at the start of this year there were 345,426 limited companies that could hold buy-to-let properties, an 11.6 per cent jump from the beginning of last year.

It continued that buy-to-let companies own a total of 615,077 properties in the UK, an 82 per cent increase since the end of 2016 when ta changes came into force meaning that personal name landlords could not claim mortgage interest relief.

Within that figure, three quarters have a mortgage charges against them, with the number of outstanding limited company mortgages have jumped 10 per cent over the last 12 months, despite the total number of buy-to-let mortgages falling by three per cent.

Hamptons added that most the growth in buy-to-let incorporation came from smaller landlords, with the number of homes held in companies with a single property going up by 21.9 per cent year-on-year. This compares to a 3.8 per cent increased in the number held by companies owning 20-plus homes.

The report added that companies owning 20 plus homes were the only ones to see the number of mortgage charges grow faster than the number of homes, which the report said showed that investors were leveraging up their portfolios.

 

Rental growth over 10 per cent in 2023

The average rent for a newly let property in Great Britain rose by 10.2 per cent year-on-year in December, the strongest end of year growth since records began in 2015.

The average tenant moving into a new home would be paying £124 more a month in rent, equal to an extra £1,488 each year.

Hamptons said that rents have risen faster than inflation for the last nine months, with rent outpacing inflation by an average of 3.5 per cent between March and November.

The estate agency said that the pace of rental growth has cooled slightly, but said that it hasn’t slowed as quickly as inflation and there were “few signs” that there would a significant slowdown any time soon.

This is due to higher landlord costs along with a lack of homes available to rent.

Those in the East of England face the biggest hikes at 13.3 per cent, equal to a £153 per month more than a year ago. Greater London, the Midlands and the North also experienced double digit hikes in 2023.

Hamptons said that as mortgage rates fall, some upward pressure on rents will ease as fewer landlords remortgaging in 2024 may need to increase rent as steeply to cover remortgage costs.

On the flip side, lower rates may also enable renters to become homeowners, lowering demand.

Hamptons said that it forecast rents on newly let properties rising by seven per cent in 2024, then five per cent in 2025 and five per cent in 2026.

 

Buy-to-let limited companies show ‘no let-up’

Aneisha Beveridge, head of research at Hamptons, said that despite last year’s slowing sales market there was “no let-up in landlords rushing to incorporate”, with a record number of limited companies set up.

She noted that this “suggests a long-term commitment from landlords ‒ particularly given the upfront costs associated with incorporating”.

Beveridge explained: “The growth has been driven mostly by existing landlords moving properties into a corporate structure to shelter themselves from higher interest rates. Meanwhile, the number of new landlords setting up shop has remained relatively muted.

“For as long as landlords continue rolling off cheap fixed-term mortgages onto rates which are twice or triple what they were paying, the number of homes being put into a corporate structure will remain high.”

She added that the number of buy-to-let incorporations each year was likely to run into the region of 40,000 to 50,000 in the foreseeable future, and in the longer-term, the current tax regime could “push half of all rental homes into a limited company, significantly reducing the existence of landlords who own buy-to-lets in their personal name”.

“Pressures on the rental market show few signs of abating. Rental growth has been more persistent than wider inflation, predominantly due to the scale of the costs faced by most landlords as a result of higher interest rates.

“Slightly lower mortgage rates in 2024 should alleviate some of these pressures and take some of the heat out of the rental market, but tenants will probably continue facing bigger rent increases than they did pre-Covid,” Beveridge noted.

Anna is a reporter for Mortgage Solutions and assistant editor for Specialist Lending Solutions, both B2B sister titles of YourMoney.com. She has worked as a journalist for over four years, initially in the specialty insurance sector before moving onto mortgages.





Source link

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

SUBSCRIBE TO OUR NEWSLETTER

Get our latest downloads and information first. Complete the form below to subscribe to our weekly newsletter.


No, thank you. I do not want.
100% secure your website.