More than four in 10 landlords are considering reducing the size of their property portfolios despite rising rental yields and strong tenant demand, according to new research from Aldermore.
The lender’s latest Buy to Let Index found that 42% of landlords may scale back their holdings, raising fresh concerns about the future supply of rental homes at a time when demand continues to outstrip availability.
The findings suggest a growing mismatch between market conditions and investor sentiment. While rental returns are improving, many landlords say tax and regulatory pressures are discouraging further investment.
Almost half of landlords surveyed (47%) reported an increase in rental yields over the past 12 months, with average returns rising by 7.2%. Nearly one in five (18%) said their yields had increased by at least 10%.
Despite this, 45% said current market conditions are preventing them from expanding their portfolios, indicating that appetite for investment in the private rented sector remains subdued.
Among landlords considering leaving the sector, increased regulation was cited as the biggest concern. More than four in 10 (43%) pointed to regulatory changes, including the recently introduced Renters’ Rights Act, while 39% blamed tax changes and 37% highlighted rising maintenance costs.
More than half (55%) said further increases in taxes on dividends, property or savings could prompt them to exit the market altogether. Meanwhile, 30% said they felt landlords were being unfairly blamed for wider problems within the housing system.
The findings add to growing industry concerns that ongoing policy and tax changes could continue to reduce landlord investment, limiting the supply of rental homes despite strong tenant demand and improving yields.
Jon Cooper, director of mortgages at Aldermore, commented: “What we’re seeing is a clear disconnect in the private rental sector (PRS). 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 PRS that landlords feel confident enough to continue providing a good standard of accommodation, as well as invest in their portfolios.
“At Aldermore, we provide brokers and landlords with both flexible lending solutions and valuable market insight, to help them navigate changing conditions and continue meeting the needs of renters.”
