The number of landlords expressing confidence about the buy-to-let sector has tumbled from two thirds to under half in three years as tax hikes hit the sector, research shows.

Data from lender Kent Reliance shows that just 41% of landlords had a positive outlook for their portfolio in the first quarter of this year, falling from 44% at the end of 2016 and down from 67% in 2014.

The report looked at ways landlords were trying to reduce costs amid extra Stamp Duty charges, stricter lending rules, and the end of mortgage interest relief.

One method identified was raising rents, with monthly rent reaching £889 on average, up 1.9% annually.

Additionally, the lender said four in ten applications have come through limited companies this year, as landlords seek to preserve the mortgage interest relief perk and be taxed as a company.

Another 24% of landlords said they were considering transferring their portfolio to a limited company or a partner or spouse.

The market also seems to be increasingly dominated by professional rather than amateur landlords, the report claims, with 30% of investors saying they make a profitable full-time living from it, the highest this figure has been in four years.

In the first three months of 2017, 10% of landlords added to their portfolios, only slightly outnumbering the 8% who reduced their holdings.

However, over the next three months, 19% of landlords expect to reduce their portfolios, compared to 13% increasing.

Meanwhile, more landlords have seen tenant demand rise than fall in the past quarter, with 27% of landlords seeing increases, but this was down from 39% a year ago, attributed to more first-time buyers getting on the property ladder.

Andy Golding, chief executive of OneSavings Bank, which trades under the Kent Reliance and InterBay brands in buy-to-let, said: “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. There are already some signs of consolidation, with highly geared amateur landlords most likely to leave, and we are also seeing investors take action to protect their margins.”

He said the rental market would still be important despite rising first-time buyer numbers.