Despite a succession of tax and regulatory changes, more than half of landlords still regard residential property as a good long-term investment.
The findings come from a survey of 437 landlords by estate agency Benham and Reeves, which found that 50.6% remain positive about the long-term prospects for property.
However, the data shows there is a clear distinction between landlords’ faith in property as an investment and their confidence in the wider rental market. 39.1% are either somewhat or very unconfident about its long-term future, compared with 33.9% who remain confident.
More than three-quarters, 78.5%, believe being a landlord is less attractive than it was five years ago, with 51.9% saying it is much less attractive.
Taxation the biggest barrier
It was taxation rather than regulation that emerged as the biggest obstacle to further investment.
Some 28.3% of landlords identified it as the main factor preventing them from investing more in rental property, compared with 15.1% who cited the Renters’ Rights Act and wider regulation.
More favourable landlord taxation was also the most commonly cited factor that would encourage further investment, at 36.9%. This was well ahead of lower Stamp Duty at 13.7%, a faster or easier possession process at 12% and greater confidence in the economy at 11.6%.
Property prices ranked third among the barriers to investment at 12.6%, followed by economic uncertainty at 9.8%, concerns over problem tenants or rent arrears at 8.6%, Stamp Duty at 6.8% and mortgage and finance costs at 6.2%.
Landlords not planning to leave
Despite these pressures, most landlords are not intending to leave buy-to-let. Almost two-thirds (62.7%) intend to maintain their existing portfolios over the next 12 months.
Just 3.9% plan to expand, though, compared with 13% who expect to reduce their holdings and 14.2% who intend to leave the rental market altogether.
Profit expectations are subdued too. Some 38.9% expect the profitability of their buy-to-let investments to decrease over the coming year, against 7.6% who expect an increase. However, the largest group, 45.8%, anticipate little change.
Long-term investment remains the priority
Among those landlords considering expanding their portfolios, retirement and long-term investment planning was their main motivation (43.7%), followed by strong tenant demand (17.2%).
Another 16.1% believe property currently represents good value, with 11.5% attracted by the potential for future house price growth.
Traditional residential buy-to-let remains comfortably the most popular choice for those considering another investment, favoured by 48.2% of the landlords questioned.
Properties requiring refurbishment were the second most popular option at 18.3%, followed by holiday and short-term lets at 11%. HMOs attracted 5.5% of landlords considering investing, with student accommodation accounting for 4.3%.
Marc von Grundherr, Director of Benham and Reeves, says: “The issue isn’t that landlords have lost faith in property. Almost two-thirds intend to maintain their existing portfolios and, amongst those looking to expand, long-term investment planning is by far the most common motivation.
“It’s particularly telling that taxation ranks well ahead of the Renters’ Rights Act when it comes to the biggest barrier preventing further investment. Regulation has understandably dominated the conversation recently, but landlords have also faced a sustained increase in the financial burden placed upon them, and our survey suggests this is having the greatest impact on investment appetite.”
