According to London lettings and estate agent, Benham and Reeves, landlords’ portfolio sizes year-on-year have dropped by 5.6%, due to new conservative government policies.
The research compared the size of investors’ portfolios between Q1 2022 and Q1 2023 and revealed that throughout England and Wales the average size has dropped from 9.1 to 8.6.
In Wales, professional landlords appear to be reducing stock the most, as portfolio sizes have fallen by 42.9%, from an average of 12.6 in 2022 to 7.2 in 2023.
In England the worst affected region is the East Midlands, where landlords have typically reduced their portfolios by 33.9%, from 11.8 to 7.8.
However, it’s likely regions with lower house prices are welcoming new investors with small portfolios, which is also pulling down the average portfolio size.
This trend of reduced portfolios isn’t the case in every region, as in the East of England typical portfolio sizes have actually increased by 43.8% year-on-year, from 6.4 in Q1 2022 to 9.2 in Q1 2023.
The remaining six regions have all seen portfolio sizes fall, with the Northeast (-1%), London (-1.3%) and the South East (-3.8%) seeing only minor reductions.
Conditions for investors have slowly worsened over the years, starting when the government introduced the 3% stamp duty surcharge in 2016.
But a more impactful change was arguably the phasing out of mortgage income tax relief, which meant that landlords were taxed on their income rather than their profits, which is now an even bigger problem since mortgage rates have risen so sharply.
In Wales — the region where landlord portfolios have fallen the most — landlords are having to cope with Rented Homes Wales Legislation, introduced in June, which gives tenants a six-month no-fault eviction notice period.
And the climate for investment looks to be even more difficult in the future, as from April next year, landlords who sell properties will only be given a personal capital gains tax allowance of £3,000, down from £6,000.
Section 21 evictions are set to be eliminated, which could mean landlords will have a harder time moving on bad tenants.
Investors with inefficient properties are expected to be tasked with bringing their homes up to an EPC level of C by 2028 to be allowed to rent them out, a process that could be costly for those who hold historic housing stock.
Director at Benham and Reeves, Marc von Grundherr, commented: “It’s getting harder to be profitable as a landlord, and that impact is starting to show.
“Declining portfolio sizes should act as a warning to the government.
“The tax landscape is unfairly balanced against landlords and unless the authorities want rental stock to continue falling in the years ahead, they may need to reverse some of these hostile policies which are driving professional landlords away.”
