Date Published 24 April 2018
According to a banking services provider due to the new tax and other changes targeting the private rented sector, landlords are increasingly branching out into different types of property investment.
The bank has recently carried out a survey of brokers and found that 14% of landlords had contacted them about extending their portfolios into commercial property and 9% wanted to invest into mixed-use stock.
The stricter lending criteria introduced by the PRA for portfolio landlords (four or more properties) together with the phasing out of the mortgage tax relief has a had a severe impact on landlord's profits.
However commercial property landlords remain unaffected by the reforms and also mixed-use or commercial properties do not incur the increased stamp duty threshold inflicted on second homes or buy-to-let properties.
The survey also highlighted that 56% of enquiries from landlords was to branch out into houses in multiple occupation (HMOs) acquisitions, to increase their profitability to compensate for the reduction of income by the reforms.
The government may be looking to change the HMO regulations as they have instigated a consultation and could close the 'loophole' from October onwards, in line with the introduction of the mandatory HMO licensing.
6% of brokers reported that landlords were looking at other opportunities, such as student 'digs', holiday lets and serviced accommodation.
Adrian Moloney, sales director of the bank, said: 'Landlords are on the hunt for greater yields, and, in the face of regulatory and tax changes, diversifying into commercial property or more complex residential options such as HMOs can offer this.
"With the buy-to-let market becoming increasingly complex, there is an opportunity for informed brokers to support landlords seeking new niches. However, these brokers must in turn be supported by specialist lenders who can offer the flexible lending needed to finance the growth of these segments of the market.'