Britain’s zeal for buy-to-let has been underlined by research revealing that the value of landlords’ property assets rose by £156bn in the past 12 months to £1.2tn — equivalent to more than half the total market value of companies on the UK stock market.
Landlords have rushed to buy properties through company structures, bypassing government attempts to cool the market by restricting tax relief on mortgage interest payments, the research found.
More buy-to-let investors bought via a limited company in the first three months of this year than in the whole of 2014, buy-to-let lender Kent Reliance said in its latest Buy to Let Britain Report.
There were 38,000 mortgage applications through corporate structures between January and March, a fourfold increase on the same period in 2015.
In spite of a string of government interventions on buy-to-let, the majority (71 per cent) of landlords viewed it positively as a long-term investment, rating it more highly than other investment options. Kent Reliance estimated the average return across Britain at 13.6 per cent, combining a yield of 4.6 per cent with current house price inflation of 9 per cent.
The move to incorporate has been driven by the planned withdrawal of higher-rate tax relief for landlords, which will be phased in between 2017 and 2020. Those who borrow through companies can still offset all finance costs against rental income, while profits at companies are taxed at lower corporation tax rates.
The use of limited companies accelerated sharply in 2016 as buyers sought to complete purchases ahead of the April 1 introduction of a three percentage point stamp duty surcharge on buy-to-let and second homes.
by James Pickford
SOURCE: Financial Times
