BTL landlords are shrinking portfolios despite rising rents

Buy to let investors in England and Wales are reducing the size of their portfolios, despite healthy rental income growth, research reveals.

According to Open Property Group, which analysed data on portfolio sizes and profitability, the average investor now holds 8.5 properties, a 1.6% year-on-year decline.

However, the regional variations are stark with Yorkshire and the Humber seeing the biggest portfolio shrinkage, with the average landlord now owning nine properties, a 27% decrease.

The West Midlands and South West also witnessed significant reductions of 19% and 13% respectively.

Portfolio sizes grew in outer London, the North West, South East and Wales.

‘Much has been made about the landlord exodus’

The firm’s chief executive, Jason Harris-Cohen, said: “Much has been made about the landlord exodus in recent times and it’s fair to say that the severity of this trend has been largely exaggerated.

“However, the figures do suggest that while buy to let investors may not be exiting completely, they are reducing the size of their rental property portfolios.

“In fact, buy to let investors are accounting for an increasingly larger segment of sellers looking to utilise the quick sale route, as they look to off-load part of their portfolio with minimum fuss or stress, having benefited from years of rental income and capital appreciation.”

He adds: “With a reduction in capital gains tax fast approaching, we expect more investors will look to streamline their portfolios given that the cost of existing is set to reduce and who can blame them?”

The trend of landlords shrinking their portfolios

The quick sale firm also found that the trend of landlords shrinking their portfolios coincides with an average rental income increase of 8.8%.

Yorkshire and the Humber again leads the way with a jump of 30.9%.

However, a closer look reveals a potential cause for the downsizing – declining profit margins.

Open Property says that rental yields have dropped by 1% in the North West and central London, suggesting rising costs are squeezing returns.