Landlords’ confidence has fallen as investors face the prospect of higher tax costs and weakening house prices, according to Kent Reliance research.
The lender’s latest Buy to Let Britain report found 41 per cent of landlords are confident about prospects for their portfolios, down from 44 per cent in the previous quarter and 67 per cent three years ago.
Kent Reliance says taxation and regulatory upheaval are behind the change, and that ongoing political and economic uncertainty will not help.
The value of the sector has risen by £68bn in the last year, climbing to a record of £1.3tn.
However, the annual rate of increase of 5.5 per cent is half the level seen a year ago.
The report found tenant demand is still growing, but more slowly.
Around 27 per cent of landlords saw tenant demand increase in the last quarter, more than saw it decrease.
But this was down from 39 per cent a year ago, as first time buyer numbers continue to recover.
Kent Reliance found 19 per cent of landlords now expect to reduce their portfolios, compared to 13 per cent increasing, as amateur landlords leave the market in response to the new tax rules affecting higher rate taxpayers.
A quarter of landlords (24 per cent) who have sought mortgage finance this year have found doing so more difficult.
A further 6 per cent seeing their application rejected altogether.
The Prudential Regulation Authority’s new underwriting standards, introduced in January, are behind the additional pressure on supply.
Limited company applications accounted for more than four in ten loans so far in 2017, compared to 60 per cent in 2016.
One third of landlords expect to raise rents in the next six months, compared to just 3 per cent who expect them to fall.
OneSavings Bank chief executive Andy Golding says: “A perfect storm of weakening house prices, higher taxes and lending restrictions have knocked investors’ confidence.
“On top of this, investors are now being buffeted by the winds of political uncertainty following the election, and its impact on the economy.
“Uncertainty will pass, but the impact of changes to mortgage tax relief and underwriting standards will leave a more indelible mark on the sector.
“We believe these changes will alter the mix of landlords, creating a more professional and stable sector in the long-term.”
The lender surveyed 750 landlords as part of the report.