Landlord confidence in the economy fell by eight 8% year-on-year to a five-year low.
The quarterly BM Solutions/ BVA BDRC Landlords Panel found that landlords are feeling the impact of government reform, particularly those with larger portfolios.
More than half (55%) of landlords said they their level of profitability has been affected since changes to the buy-to-let market were announced in 2015.
Phil Rickards, head of BM Solutions, said: “This quarter’s Landlord Panel research paints a more cautious picture from the last quarter when landlords did not experience any financial difficulty.
“The buy-to-let industry has been through many regulatory changes over the past few years, and the effects of this are clearly being felt.
“However, the landscape is not entirely bleak. The proportion of landlords making a profit from their lettings activity remains at 88%, equaling the record high seen in quarter three 2018
“It is clear that the market is sensitive to the current legislative and macro-economic environment and this has been reflected in the latest findings.”
Larger portfolio and mortgage buy-to-let landlords experienced this the most, with 75% of landlords managing between 11 to 19 properties saying their level of profitability has decreased.
Almost one in four (23%) landlords are also planning to sell at least one property this year, with landlords owning a portfolio of 11-19 properties more than twice as likely to sell. This compares to just one in seven (15%) landlords who said they are looking to increase the size of their portfolio.
Although one in four landlords reported an increase in perceived tenant demand in the last three months, the picture varied across the country.
The East Midlands generated the highest levels of demand, whereas one in three landlords in Central London thought that demand is decreasing.
The level of void incidence, any length of time when a property isn’t occupied, was the highest recorded over the past five years with variations again across the country.
Landlords in the North of England were most likely to experience void periods this quarter, about 60%, whilst those in the South East and West Midlands were least likely, around 35%.
Feedback from landlords suggested that this could be due to reluctance amongst tenants to move due to the high costs involved, legal fees and inertia following the Christmas period.
At 5.6% on average, yields are at their lowest point for three years, and at the joint lowest level recorded in the past eight years. Landlords with HMOs continue to achieve the highest rental yields, with the margin widening to other forms of property.
However landlords are feeling slightly more optimistic around the prospects for rental yields and the private rental sector (PRS), and about the same in terms of their own individual prospects.
The proportion of landlords making a profit from letting activity remains at 88%, equalling the record high seen in Q3 2018.