There has been a sharp drop in the number of buy to let landlords expanding their portfolios in the first quarter of 2017, the latest index shows.
Just 13% of landlords are currently planning to buy more properties, according to the data from BM Solutions, part of the Lloyds Banking Group, the smallest proportion since its survey began 11 years ago.
It suggests that there are a range of reasons and while recent tax changes have had an impact, such as the phasing out of mortgage tax relief just introduced, and the extra 3% rate of stamp duty on additional homes introduced a year ago, there are other factors.
The BM Solutions survey suggests that the fact that tenant demand continued to slow in the first three months of the year could also be affecting future plans. Indeed, some 17% of landlords reported a fall in demand, especially in central and outer London areas where the proportion of landlords reporting falling tenant demand is now outnumbers those experiencing growth.
But in spite of these negative findings, confidence among landlords has stabilised, with the proportion of landlords feeling optimistic about the UK’s financial markets having more than doubled over the past 12 months.
In terms of how landlords feel about their own letting business, the levels have bounced back to the same recorded in the first quarter of last year and there is also confidence regarding capital gains, the UK private rental sector in general and rental yields remaining stable.
Landlords in the South East are most optimistic about the prospects of their own letting business, with 47% feeling ‘good’ or ‘very good’ about its prospects, while those in Scotland and Wales are the least optimistic with just 26% feeling positive.
The survey also found that fewer landlords are seeing rents rise, just 48% compared to 53% in the fourth quarter of 2016. Some 42% have increased rents across their own properties but this is down 3% quarter on quarter while 32% are intending to do so in the next six months, down 5% from the previous quarter.
‘Despite signs of landlord confidence stabilising this quarter, fewer landlords are feeling optimistic about the prospects for their own businesses. This has driven down the number of those looking to expand their portfolio further to a new all-time low despite the average portfolio creeping up slightly,’ said Phil Rickards, head of BM Solutions.
‘The impact of the tax changes has a natural link to landlord confidence, as the market landscape continues to be reshaped by changes in regulation,’ he added.