The Financial Times has reported on the growing number of buy-to-let landlords who own through limited companies have been purchasing rental homes, challenging the picture of decline across the private rented sector.

The article can be seen here (subscription may be necessary), and says that the landscape of the buy-to-let market in the UK is evolving, with a notable shift toward limited company ownership among landlords. According to research by Hamptons and Nottingham University, there has been a significant increase in the number of new properties purchased by buy-to-let limited companies, reaching 85,000 in the year to September. This marks a striking 165% rise from the 32,000 bought in the same period in 2017, when tax and regulatory changes began to impact the sector.

Despite concerns over the health of the buy-to-let market, the data suggests that larger landlords with established portfolios are increasingly utilizing limited companies for their acquisitions. Research indicates that over three-quarters of buy-to-let limited companies operating in 2017 have since acquired additional properties, with 90% of companies owning 20 or more properties continuing to purchase. This trend challenges the narrative that buy-to-let investment is in decline, particularly as it appears that the reductions in new purchases are largely from smaller landlords who operate outside of limited companies.

The transition towards limited company ownership is partly a response to changing tax regulations, including the gradual removal of mortgage interest relief for personal ownership, which was phased out by 2020. In contrast, the structure of limited companies may offer advantages, especially for new acquisitions. The current average buy-to-let mortgage rate is 5.24%, according to Moneyfacts, which further complicates the financial landscape for individual landlords.

However, transitioning existing properties into a limited company structure comes with its own set of challenges, such as potential capital gains tax liabilities and increased administrative costs, which can deter some landlords. Notably, 27% of buy-to-let purchases in the last year were made through limited companies, indicating a trend towards incorporation even among smaller investors.

While the overall number of buy-to-let purchases has declined, with landlords accounting for only 10% of all homes sold this year (down from 16% in 2015), the shift towards limited company ownership suggests that these investors are looking to secure their position in the market for the long term. The competition among renters remains high, particularly in southern England, where homeownership remains largely unaffordable for many. This ongoing demand for rental properties indicates that the private rented sector may continue to attract investment, albeit with new dynamics and challenges in play.