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Buy to let specialist gives upbeat forecast, despite tax changes

Specialist buy to let lender Paragon Mortgages has given an upbeat forecast for the private rental sector, despite the arrival of new tax burdens for landlords.

Paragon says gearing amongst landlords remains low so far this year with the average loan-to-value ratio decreasing two per cent to 35 per cent in the first quarter of a year, according to the firm’s survey of some landlord clients.

Some 68 per cent of landlords now have borrowings of less than half the value of their investment property portfolios and, since the second quarter of 2012, average gearing has reduced significantly.

On average, landlords spend 30 per cent of their rental income on mortgage payments, with almost half suggesting they spend less than a quarter.

Although buying intentions remain subdued, there has been no large-scale sell off by landlords of buy-to-let properties. The size of the average portfolio is 13 properties, unchanged from the autumn, and Paragon insists the forecast is stable as landlords indicate they do not expect their portfolios to change in size over the next 12 months.

Twenty five per cent of landlords expect the value of their portfolio to increase in the next 12 months, whilst just eight per cent think it will decrease. Some 38 per cent of those questioned said tenant demand was ‘growing’ or ‘booming’ and 46 per cent believe tenant demand will increase over the next 12 months.

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