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Landlords are diversifying their portfolios in search for greater yields

Monday 23 April 2018

Around 51 per cent of UK brokers have been approached by landlords looking to diversify their portfolios in the last six months, according to new research from OneSavings Bank.

And 56 per cent of enquiries were about diversifying into Houses with Multiple Occupants (HMOs), which can generate a higher yield for landlords despite new regulations set for October.

The findings echo last week’s ‘Emerging Landlord’ report from Simple Landlords Insurance, which found that landlords were becoming younger, better informed, with more expansive and diverse portfolios. 43% of HMO landlords are in buying mode, with flats and holiday lets also areas of growth. 

According to OneSavings, landlords are also increasingly diversifying into commercial and semi-commercial properties after the Prudential Regulation Authority (PRA) introduced stricter underwriting standards for portfolio landlords with four or more properties and the changes to tax treatments for buy-to-let properties. 

The research found 14 per cent of brokers said they had been approached by landlords wanting to increase the level of commercial property within their portfolio. 

In addition, 9 per cent reported that landlords wanted to diversify into mixed-use properties. Unlike residential buy-to-let property, landlords holding only commercial property will not be affected by the reforms to mortgage tax relief. 

Another six per cent of brokers said landlords were looking to diversify into student accommodation. 
Adrian Moloney, sales director at OneSavings Bank, said: “Landlords are on the hunt for greater yields, and, in the face of regulatory and tax changes, diversifying into commercial property or more complex residential options such as HMOs can offer this. 

“With the buy-to-let market becoming increasingly complex, there is an opportunity for informed brokers to support landlords seeking new niches. 

“However, these brokers must in turn be supported by specialist lenders who can offer the flexible lending needed to finance the growth of these segments of the market.”

Likewise, insurance products will need to adapt to support changing investment strategies. Tom Cooper, Director of Underwriting at Simple, added: “We want to be able to support the emerging community on aspiring and professional landlords to grow their portfolios and profits with our back-up. We can be the safety net that lets landlords grow, diversify and thrive.”

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