The growth of the private rented sector (PRS) is subdued thanks to Brexit uncertainty and government intervention according to the latest edition of the Buy to Let Britain report by Kent Reliance for Intermediaries.
The value of PRS grew by £6bn in the last year, whilst the value of the average rental property saw a year-on-year increase of 0.3%.
The biggest annual decline was in London which reportedly took a disproportionate toll on the overall value of the sector.
Landlord confidence has also dropped to the second-lowest level on record, with just 37% of landlords holding a positive outlook for their portfolio and around a quarter (24%) expect rents to rise in the next six months.
Andy Golding, chief executive of OneSavings Bank, which trades under the Kent Reliance for Intermediaries and InterBay Commercial brands in buy to let, said: “Landlords have rolled with the punches as best they can, but there is no escaping that growth is subdued in the private rented sector following four years of government intervention.
“Brexit uncertainty has only compounded this issue, having the obvious knock-on-effect on landlords’ confidence.
“The positive news is that for those landlords looking to expand their portfolios, underlying market conditions seem to be changing. Yields are climbing as rents rise faster than house prices, providing further opportunities for committed investors.
“Professional landlords haven’t stood idle either. Holding property in a limited company structure is increasingly popular for landlords adding to their portfolio, while many are also remortgaging to fix outgoings by taking advantage of historically low rates.
“However, it’s clear the private rented sector now holds less appeal for amateurs.”
Kent Reliance for Intermediaries’ latest mortgage data found that 72% of buy to let mortgage applications were made through a limited company in Q1 2019.
The number of homes is estimated to have grown by 11,000 properties per year, a rise of 0.2% with 5.4 million properties currently in the PRS.
Rents have reached a record high at an average of £895 pcm, with a growth of 1.3% a year which has also led to yields reaching a two year high at 4.5%.
Golding added: “Without some policy stability, there is the tangible risk that the supply of homes will contract, and rents will become less affordable.
“Rents are already rising, and will continue to do so as landlords come to terms with higher set up and running costs, on top of larger tax bills.
“Neither outcome suits tenants, nor helps with the ultimate issue of housing affordability.”