Rents look set to rise in the near term as landlords pass on the higher costs heaped on them by new taxes and regulations, buy-to-let lender Kent Reliance said in its latest Buy to Let Britain Report.
The firm's fourth edition of the report revealed that total rent collected by landlords reached a record £53bn in the past 12 months, up £5.3bn on a year ago, thanks to a 3.5% hike in the average monthly rent to £872pcm. This has helped to push up the total value of landlords' property assets by £156bn in the past 12 months to £1.2tn.
Rents are set to increase further, with 40% of landlords expected to raise rents before the end of the year, by an average of 5.6%, or around £49 per month.
Despite a number of government interventions on buy-to-let, 71% of landlords still view 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%, combining a yield of 4.6% with current house price inflation of 9%.
The report also found that there was an inevitable rise in the number of buy-to-let landlords acquiring homes via a limited company in first three months of this year in response to the new stamp duty surcharge, while more landlords plan to increase rents to offset the extra costs, including mortgage interest tax relief cuts to be phased in from 2017.
Kent Reliance said that buy-to-let lending to limited companies increased to almost 38,000 loans in the first quarter of 2016, higher than the total for the whole of 2014, new figures reveal.
The lender estimates that 98.400 loans for buy-to-let properties will be issued to limited companies by the end of this year, up from around 55,000 across the whole buy-to-let market in 2015, and almost three times its share of the market in 2014, as landlords aim to mitigate the impact of the tax changes.
Borrowing through a company structure means investors are taxed on profits at lower corporation tax rates, and can offset all finance costs against rental income.
Andy Golding, chief executive of OneSavings Bank, which owns Kent Reliance,, commented: "The buy-to-let market now sits firmly in the crosshairs of both politicians and regulators, and we are seeing landlords react.
"Thousands hurried purchases to beat the stamp duty deadline, and the popularity of limited companies is soaring as investors seek to reduce tax exposure.
"But it is tenants who are feeling the real brunt. Rents are rising, and landlords will increase them further as they pass on the increased cost of running their businesses. Far from supporting tenants, recent intervention will see them bear a heavier financial burden."
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