New research from the bank Handelsbanken suggests some landlords will reduce their portfolios if economic conditions worsen.

Almost 60 per cent of landlords say they are preparing to increase rents to compensate for higher costs, with a fifth saying they are planning to sell some of their portfolio to directly combat the cost of living crisis. Around a third say they are looking for ways to make their properties more energy-efficient to combat rising fuel costs.

The study illustrates the impact that rising energy bills and the cost of living squeeze are having among smaller professional landlords. Those with four or five properties are twice as likely to be making their properties energy efficient for instance, compared to those with more than 10 properties.

The study also shows that just over a third are cutting back on buying properties in cities as the market adjusts to changing employment practices, with more people working from home. 

Almost all respondents say the current market outlook has impacted their portfolio/ investment strategy in some way, with just over half concerned they will experience longer voids. 

Some 21 per cent of landlords report that one or more mortgage deals have fallen through, with 40 per cent adding their lender has increased the loan rate on one or more properties in their portfolio.

As a result, 45 per cent say they are planning to purchase lower-value properties to remain under the Stamp Duty Land Tax threshold to combat rising costs. There could also be knock-on effects on tenants as a quarter of landlords say the current economic environment will affect the maintenance and refurb programmes of their portfolios.

James Sproule, UK chief economist at Handelsbanken, says: “The property market is entering a period of increasing uncertainty, with house prices in some areas already falling and a rising regulatory burden being seen by some landlords as a reason to reduce their exposure to the market. 

“While the ongoing cost of living crisis might be seen as the driving factor in the buy to let market, equally important are the post-pandemic movement back into cities, potential buyers delaying purchases and thus looking to rent, and fewer properties, meaning those who do persevere, are likely to see higher yields. Savvy landlords are using the changes to stamp duty to cost-effectively reshape their portfolios and invest in energy efficiency, something which has become an ever greater concern of potential tenants.”