More than 40% of landlords said that despite rising rental yields and surging tenant demand, they are considering reducing the size of their property portfolios.
According to findings from Aldermore’s buy-to-let (BTL) index, 47% said their rental yields had risen over the past year, with average increases of 7.2%, and nearly one in five (18%) reported gains of 10% or more.
However, 45% said current market conditions are preventing them from growing their portfolio, while 42% said they are considering reducing the number of properties they own.
The pressures causing the biggest proportion of landlords to reconsider their position in the market are increases in tax rates on dividends, property and savings and increased regulation, including the Renters’ Rights Act.
Jon Cooper, director of mortgages at Aldermore, said: “What we’re seeing is a clear disconnect in the private rental sector. Demand from tenants remains strong and landlords are seeing improved yields, but increasing regulation, tax changes and rising costs mean many are hesitant to invest further. It’s vital for the overall health of the [sector] that landlords feel confident enough to continue providing a good standard of accommodation, as well as invest in their portfolios.”
Earlier this month, Morningstar, a credit ratings agency, said landlords exiting the private rented sector because they are unwilling or unable to adapt to its economics and regulatory environment could lead to a smaller UK BTL mortgage market.
Aldermore Insights with Jon Cooper: Edition 9 – Why lending strategy is becoming more central in buy to let
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