Despite a decrease in landlord property purchases, 2023 saw a record 50,004 new buy-to-let companies established in the UK, exceeding the 2022 figure of 48,520.
This trend reflects a shift towards limited company structures for property holding, particularly in response to tax changes since the end of 2016.
This structure has become increasingly popular among landlords facing higher mortgage rates.
The total properties owned by buy-to-let companies now stand at 615,077 in the UK, an 82% increase from the end of 2016. 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%.
Significant rental growth was also 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.
Aneisha Beveridge, head of research at Hamptons, said: “Despite last year’s slowing sales market, there was no let-up in landlords rushing to incorporate.
“Rather, the record number of companies set up to hold buy-to-let homes suggests a long-term commitment from landlords – particularly given the upfront costs associated with incorporating.
“The growth has been driven mostly by existing landlords moving properties into a corporate structure to shelter themselves from higher interest rates. Meanwhile, the number of new landlords setting up shop has remained relatively muted.
“For as long as landlords continue rolling off cheap fixed-term mortgages onto rates which are twice or triple what they were paying, the number of homes being put into a corporate structure will remain high.
“The number of buy-to-let incorporations each year is likely to continue running in the region of 40,000-50,000 for the foreseeable future.
“Longer term, the current tax regime could push half of all rental homes into a limited company, significantly reducing the existence of landlords who own buy-to-lets in their personal name.”
She added: “Pressures on the rental market show few signs of abating. Rental growth has been more persistent than wider inflation, predominantly due to the scale of the costs faced by most landlords as a result of higher interest rates.
“Slightly lower mortgage rates in 2024 should alleviate some of these pressures and take some of the heat out of the rental market, but tenants will probably continue facing bigger rent increases than they did pre-Covid.”
