A significant proportion of buy-to-let landlords are considering scaling back their property portfolios, despite experiencing a rise in rental returns and robust tenant demand. New research from Aldermore indicates that 42% of landlords may reduce their holdings, a move that could exacerbate existing pressures on the availability of rental homes across the UK.
The findings highlight a growing disparity between the improving financial performance of rental properties and the sentiment of investors in the private rented sector. While nearly half of landlords surveyed (47%) reported an increase in rental yields over the past 12 months, with average returns climbing by 7.2%, many are hesitant to expand their investments due to other factors.
Almost one in five (18%) landlords saw their yields increase by at least 10%. However, 45% stated that current market conditions are preventing them from growing their portfolios, suggesting that the appetite for new investment in the private rented sector remains subdued despite these positive financial indicators.
The primary reasons cited by landlords for considering an exit from the sector are increased regulation and changes to the tax regime. Over four in ten (43%) pointed to regulatory changes, including the recently introduced Renters' Rights Act, as a major concern. Additionally, 39% attributed their hesitation to tax changes, while 37% highlighted the impact of rising maintenance costs on their operations.
Furthermore, the research revealed that more than half of landlords (55%) would consider leaving the market altogether if there were further increases in taxes on dividends, property, or savings. A notable 30% also expressed a feeling that landlords are unfairly blamed for broader systemic issues within the housing market.
Jon Cooper, director of mortgages at Aldermore, commented on the 'clear disconnect' within the private rental sector. He emphasised the importance of landlords feeling confident to continue providing accommodation and investing in their portfolios, given the strong tenant demand and improving yields, to maintain the overall health of the sector.