BTL market sees signs of recovery after stamp duty rise

Asked about expected business in the next three months, just 41% of landlords rated their prospects as being either ‘good’ or ‘very good, down from 65% during the same period last year. Indicating that falling levels of confidence may have stabilised however, the figure is just 2% down on Q4 2015.

Reflecting this, Q1 2016 also saw landlords’ property purchase intentions edge above selling intentions, reversing the situation seen in Q4 2015 when more landlords were looking to sell property than were looking to buy. Nearly a fifth (19%) of landlords indicated that they intend to purchase a property in the coming year, up from 17% in Q4 2015. 16% of landlords indicated that they intend to sell a property, down from 19% in the previous quarter.

Tenant demand is also driving this recovery, while yields in Q1 2016 also grew slightly on the previous quarter.

Additionally, 38% of landlords believe investing in the PRS is still ‘much better’ than other investment options such as stocks and shares.

John Heron, Director of Mortgages at Paragon, said: “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.”