"The number and variety of limited company offerings is expected to grow and increased competition will help sustain pricing at reasonable levels"
From a lending perspective, swap rate volatility and rising interest rates are impacting pricing and appetite. Criteria and policy is also being closely monitored from an affordability perspective in the face of rising living costs.
This is also a sector which sits under a constant regulatory microscope, as evidenced by the array of tax and legislative change seen over the past five years or so. Change which has affected the way in which landlords structure their portfolios and shaped buying behaviour, not to mention profit margins and bottom lines. As a result, some landlords have taken the decision to exit the market altogether and it’s fair to say that we have seen far more activity at the more professional end of the landlord spectrum rather than amongst those often referred to as ‘amateurs’.
One of the main questions raised over the course of these past few years for all landlords is whether to incorporate any existing or new investments into a limited company structure. The pros and cons have been widely debated, especially from a tax standpoint and the attraction has been heightened further by the rise in the number of limited company options and a lowering of premiums attached to this product type. Of course, there are many other considerations for landlords to take into account from a financial and administrative perspective, especially in light of an economic climate which is experiencing rising levels of inflation.
This was evident in research from GetGround which highlighted that 79% of UK landlords who invest through limited companies believe that their incorporated status better mitigates the risks of inflation than if they were to invest in property in their personal names. 76% of those surveyed said that limited companies have allowed them to adjust more easily to rising inflation. A similar proportion (73%) revealed that limited company investing makes them feel more protected against inflation.
These findings come as property investment through limited companies continues to grow. 81% of UK landlords surveyed by GetGround hold at least a quarter of their property portfolio in limited companies. This data correlates with recent industry evidence that showed that around half of UK investment property purchases in 2021 were completed through limited companies – the highest annual total on record. The research also suggested that landlords with single investment properties or smaller portfolios were less likely to choose limited company structures than counterparts with larger portfolios. Of these landlords questioned in GetGround’s survey, 60% did not hold any property investments in limited companies.
The number and variety of limited company offerings is expected to grow and increased competition will help sustain pricing at reasonable levels, especially from specialist lenders where such products are only available through intermediary channels. This factor alone highlights the merits of the advice process but when you also add the complexity involved in such transactions into the mix then this really is a combination which outlines the importance and value attached to specialist support for landlords and for advisers who may not be fully aware of the intricacies involved in limited company borrowing.
