Tax reform and tighter landlord regulation is slowing the growth of the private rental sector, according to Kent Reliance.
The lender’s latest Buy to Let Britain report says this growth restriction comes despite the overall value of the PRS hitting a new high of £1.4tn.
This is a rise of 6.4 per cent (£82.6bn) in the last year.
The report says rising house prices have been the main cause of this increase, with the average rental property climbing in value by 4.2 per cent in the last year.
The total number of households in rented accommodation is growing much more slowly.
There are nearly 5.6m households across Great Britain in the private rented sector, just 2.2 per cent more than a year ago.
This is less than a third of the rate of increase seen in 2014.
The Kent Reliance report suggests this growth slowdown reflects landlords’ fragile confidence in the sector.
Just 41 per cent of the 856 landlords surveyed for the report were confident about their portfolios’ prospects.
While this is a slight recovery from the record low reached in the second quarter of 2017 it remains far lower than in recent years.
Kent Reliance says confidence has been hit by tax reform reducing the amount of mortgage interest that can be offset against tax, rising costs, and new mortgage rules that have tightened criteria.
Tenant demand is growing more slowly too. Just 5 per cent more landlords reported rising tenant demand than those reporting it fall, the lowest balance in at least five years.
This has been reflected in easing in rental inflation.
Average rents per property now stand at £895 per month across Great Britain. Although this is another new high, the typical rent increased by 1.5 per cent annually, down from 2.4 per cent a year ago, with sluggish growth in London weighing on the national average.
Rents are likely to continue to climb as 29 per cent of landlords expect to increase rents over the next six months, ten times the number who expect to reduce them.
The lender says that landlords could look to pass on costs to tenants to cover the taxation rises over each of the next three years.
Kent Reliance’s data also shows that, in the first three quarters of 2017, more than seven in ten buy to let applications for house purchase were via limited companies, up from 45 per cent in 2016.
OneSavings Bank chief executive Andy Golding says: “Landlords are swallowing the unpleasant cocktail of higher taxation and tighter regulation, and this is undermining the expansion of the private rented sector.
“A fundamental shift in the landlord population is now underway, as buy to let moves from being a popular past-time for hundreds of thousands of British amateur landlords, to the preserve of committed long-term investors with experience and expertise.
“The pace of professionalisation will only increase following the PRA’s latest moves, and incorporation continues apace.”