A new report from Mortgages for Business has analysed buy-to-let purchase activity during the first three months of the year.Data from the investigation suggests that investors are purchasing smaller and less expensive properties.
The lender says that average loan amount and security values fell for all property types, with figures for ‘vanilla’ properties well down on those seen over the last year.
In addition, the opening quarter of the year saw a shift in the buy-to-let market, from remortgaging to purchasing.
This was particularly strong amongst more complex property types, such as HMOs, multi-unit freehold blocks and semi-commercial property.
David Whittaker, CEO of Mortgages for Business, noted: ‘These figures represent a departure from the established norms, which have been mostly defined by the remortgage market. This time, however, we see new and unusual purchase activity from landlords, presumably because changes to income tax relief have prompted them to re-examine their strategies.’
Buy-to-let investors targeting smaller, cheaper properties
Over the opening three months of the year, purchases made up 41% of mortgage transactions involving vanilla buy-to-lets-around 3% above the trend. Whittaker observes that this, ‘is likely evidence of an ongoing process of landlords selling their portfolios to newly created limited companies.’
The lender says that despite incorporation not be particularly cost effective for all investors, transactions such as this can reduce the tax burden on buy-to-let landlords. They often serve to offset the initial expense and could negate higher costs for tenants moving forwards.