More than two in five landlords (42%) say they will be able to reduce their property portfolio, despite rising rental income and rising tenant demand.
This is evident from research by Aldermore’s Buy to Let Index.
Aldermore said the findings point to a growing gap in the market. Demand and returns are rising, but regulatory and tax pressures are preventing many landlords from investing further in their portfolios, the research shows.
Almost half of all landlords (47%) say their rental income has increased over the past year, with an average increase of 7.2%, and almost one in five (18%) reported a gain of 10% or more.
However, almost half (45%) of landlords say current market conditions are preventing them from expanding their portfolio.
While there has not been a widespread real estate sell-off, the research suggests that investment momentum in the sector has slowed significantly.
For landlords considering leaving the sector, policy and regulatory pressure are the key drivers. Among those considering quitting:
- 43% mention increased regulations, including the recently introduced regulations Tenants’ Rights Act
- 39% point to tax changes
- 37% say high maintenance costs are driving them away
- 55% say increases in tax rates on dividends, property and savings could force them to leave the country
- 30% say they feel unfairly scapegoated because of broader challenges to the housing system
Jon Cooper, mortgage director at Aldermore, said: “What we are seeing is a clear divide in the private rental sector.
“Tenant demand remains strong and landlords are seeing better returns, but increasing regulation, tax changes and rising costs are making many hesitant to invest further. It is vital for the overall health of the private rental sector that landlords have enough confidence to continue to provide good quality housing and invest in their portfolios.”