Key Points:

  1. Record Number of Buy-to-Let Companies in 2023:
    • Despite a decrease in landlord property purchases, the UK witnessed a record 50,004 new buy-to-let companies established in 2023, surpassing the 2022 figure of 48,520.
  2. Shift Towards Limited Company Structures:
    • The trend reflects a shift towards limited company structures for property holding, especially in response to tax changes since the end of 2016.
    • This structure is increasingly popular among landlords facing higher mortgage rates.
  3. Total Properties Owned by Buy-to-Let Companies:
    • The total properties owned by buy-to-let companies in the UK now stand at 615,077, marking an 82% increase from the end of 2016.
  4. Buy-to-Let Mortgages and Limited Companies:
    • While the overall number of buy-to-let mortgages decreased by 3% in the last year, mortgages for properties within limited companies rose by 10%.
  5. Rental Growth:
    • Significant rental growth was observed, with the average rent for newly let properties in Great Britain increasing by 10.2% year-on-year in December, the highest annual growth since records began in 2014.
  6. Reasons for Incorporating:
    • Existing landlords are moving properties into a corporate structure to shield themselves from higher interest rates.
    • The upfront costs associated with incorporating suggest a long-term commitment from landlords.
  7. Long-Term Outlook:
    • The number of buy-to-let incorporations is expected to continue running in the region of 40,000-50,000 for the foreseeable future.
    • The current tax regime could lead to half of all rental homes being held within limited companies, reducing the existence of landlords owning buy-to-lets in their personal name.
  8. Rental Market Pressures:
    • Pressures on the rental market show few signs of abating, with rental growth being more persistent than wider inflation.
    • Higher interest rates contribute to significant costs for landlords, impacting rental market dynamics.
  9. Market Outlook:
    • Slightly lower mortgage rates in 2024 are expected to alleviate some pressures on the rental market, but tenants may continue facing larger rent increases than pre-Covid.

The data reflects ongoing trends in the buy-to-let market, including the influence of tax considerations and the impact of interest rate changes on landlord behavior.