1 in 5 landlords are looking to reduce portfolios

1 in 5 landlords are looking to reduce portfolios

8:03 AM, 16th November 2022, About 6 months ago 2

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Landlords are making big adjustments to their portfolios to meet the cost-of-living crisis, research reveals.

According to Handelsbanken, nearly three in five (60%) landlords say they are preparing to increase rents to compensate for higher costs.

And a fifth say they are planning to sell some of their portfolio to directly combat the cost-of-living crisis.

Around a third say they are also looking for ways to make their properties more energy-efficient to combat rising fuel costs.

Impact the cost-of-living squeeze is having on landlords

The study, which follows up on the bank’s recent Property Survey Report, illustrates the impact that rising energy bills and the cost-of-living squeeze are having among smaller professional landlords.

Those with four or five properties are twice as likely to be making their properties energy efficient for instance, compared to those with more than 10 properties.

The study also shows that more than a third (34%) are cutting back on buying properties in cities as the market adjusts to changing employment practices, as more people are working from home.

Almost all (93%) respondents say the current market outlook has impacted their portfolio/investment strategy in some way, with more than half (53%) concerned they will experience more void months.

The bank’s previous research on the impact of the Covid pandemic on void months found that more than 40% of landlords had experienced more void months than usual, so the prospect of further vacancies will be of concern.

Landlords report that one or more mortgage deals have fallen through

More than one in five (21%) landlords report that one or more mortgage deals have fallen through, with two in five (40%) adding their lender has increased the loan rate on one or more properties in their portfolio.

As a result, 45% say they are planning to purchase cheaper properties to remain under the Stamp Duty Land Tax (SDLT) threshold to combat rising costs.

And there could also be knock-on effects on tenants as a quarter of landlords say the current economic environment will affect the maintenance and refurb programmes of their portfolios.

‘A reason to reduce their exposure to the market’

James Sproule, the UK chief economist at Handelsbanken, said: “The property market is entering a period of increasing uncertainty, with house prices in some areas already falling and a rising regulatory burden being seen by some landlords as a reason to reduce their exposure to the market.

“While the ongoing cost of living crisis might be seen as the driving factor in the buy-to-let market, equally important are the post-pandemic movement back into cities, potential buyers delaying purchases and thus looking to rent, and fewer properties, meaning those who do persevere, are likely to see higher yields.”

He added: “Savvy landlords are using the changes to SDLT to cost-effectively reshape their portfolios and invest in energy efficiency, something which has become an ever-greater concern of potential tenants.”

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Simon Lever - Chartered Accountant helping clients get the best returns from their properties

22:03 PM, 16th November 2022, About 6 months ago

How many are reducing their portfolios as Handelsbanken consider that transferring from individual/partnership to a limited company is tax evasion and they will not agree to transfer mortgages or loans on incorporation!
Have heard from at least 2 different contacts that Handelsbanken have told them this.

Contended Ted

19:05 PM, 5th December 2022, About 6 months ago

Reply to the comment left by Simon Lever - Chartered Accountant helping clients get the best returns from their properties at 16/11/2022 - 22:03
Reducing the portfolio can be for reasons of financial caution. I remember banks calling loans in on property portfolios in 2008 and insisting on better loan to value ratios. Remember Grant Bovey and Anthea Turner. With concerns as well over EPC expenditure and thin margins due to mortgage cost, a portfolio reduction makes sense to me at least.

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