Landlords consider selling up despite rising yields

More than two in five landlords may sell off part of their property portfolios despite reporting stronger yields, Aldermore reveals.

The lender says that 42% of landlords are considering portfolio cuts as regulation, taxation and property costs weigh on investment decisions.

Its latest Buy to Let Index found that nearly half of those surveyed (47%), said their yields had increased during the past year, with the average rise reaching 7.2%.

Almost one in five landlords, (18%), reported yield growth of at least 10%.

Landlords don’t want to invest

Jon Cooper, Aldermore’s director of mortgages, said: “What we’re seeing is a clear disconnect in the private rental sector (PRS).

“Demand from tenants remains strong and landlords are seeing improved yields, but increasing regulation, tax changes and rising costs mean many are hesitant to invest further.”

He added: “It’s vital for the overall health of the PRS that landlords feel confident enough to continue providing a good standard of accommodation, as well as invest in their portfolios.”

Market conditions affecting landlords

Despite higher yields, 45% of landlords said current market conditions were preventing them from expanding their portfolios, even though tenant demand remains strong.

The research found no evidence of a widespread sell-off, and of those considering selling, 43% point to tighter regulation, including the Renters’ Rights Act, while 39% pointed to tax changes.

Maintenance costs were highlighted by 37%, and 30% said landlords were being unfairly blamed for broader problems in the housing system.

However, more than half (55%) said higher tax rates on dividends, property and savings could push them to leave the sector.