A two-speed market has emerged in the buy-to-let sector as smaller landlords have stopped adding to their portfolios, according to Octane Capital.
The property finance firm reports that landlords are becoming more professional as amateurs turn away from the buy-to-let market.
The changing regulatory and fiscal environment has unsurprisingly had an adverse impact on the market, leaving some landlords with little choice but to reappraise the viability of their property portfolios, as reflected by a drop in amateur buy-to-let landlords acquiring homes.
But it is not all doom and gloom in the private rented sector. While fewer small-scale landlords are adding new homes to their stock, experienced landlords still remain active in the market.
“Amateur landlords are beating a fast retreat,” said Jonathan Samuels, CEO of the property lender, Octane Capital. “While professional landlords and institutional investors remain active, amateur landlords are fast becoming an anachronism.”
Samuels points out that the buy-to-let market is currently dominated by remortgaging activity, as reflected by the latest UK Finance Mortgage Trends data and ONS English Housing Survey.
“What activity there is within buy-to-let is primarily the remortgaging of existing portfolios or properties in order to maintain some kind of margin,” he added.
While the number of people living in the private rented sector has continued to grow, the crackdown on landlords has forced average rents upwards.
Samuels continued: “What’s particularly eye-opening is the significantly higher percentage of joint income that privately renting households spend on their rent compared to people paying a mortgage.
“Rents have risen astronomically in recent years while cheap borrowing costs have made mortgage payments exceptionally competitive.
“Given that homeowners are more likely to be in higher income groups than renting households, that's a fundamental disconnect.”