The buy-to-let sector is set to continue declining until 2021, says a new report, which also forecasts a further price correction in the London housing market.
The number of buy-to-let mortgage approvals for purchase dropped in 2016 by 13%, followed by a drop of 27% last year.
The new report, compiled by the Centre for Economics and Business Research for Shawbrook Bank, says there will be further falls as the sector adjusts to a raft of tax changes and new regulation.
The bank says that government policies have had a marked effect.
It expects that the market will stabilise in 2021, which will be followed by returns to growth in the following two years.
Shawbrook expects that strong tenancy demand will continue, and that supply will be underpinned by professional landlords.
The report also says that London house prices could drop further.
It says: “London has long dominated the BTL sector.
“But a flat housing market and limited capacity for rental growth in the capital means that other places in the country offer better yields to investors, especially cities with large student populations.
“Brexit adds a further layer of uncertainty: with a number of City jobs at stake, London’s housing market might be in for a further price correction.”