More than two in five landlords are considering reducing their property portfolios despite improving rental yields and strong tenant demand, research by Aldermore reveals.

The lender found that 42% of landlords may cut the number of properties they own, while 45% say current market conditions are preventing them from expanding their portfolios.

Yields increasing

The findings come despite nearly half of landlords – at 47% – reporting that rental yields have increased in the past year.

Among those recording growth, average yields rose by 7.2%, while almost one in five landlords – at 18% –  reported increases of 10% or more.

Of those landlords considering leaving the sector, 43% cite increased regulation – including the Renters’ Rights Act – , while 39% point to tax changes and 37% say rising maintenance costs are pushing them towards the exit.

More than half – at 55% – also say further increases in taxes on dividends, property and savings could force them out of the market, while 30% feel landlords are being unfairly blamed for wider housing system challenges.

Jon Cooper (pictured), Director of Mortgages at Aldermore, says landlords are increasingly reluctant to invest.

It’s vital for the overall health of the PRS that landlords feel confident enough to continue providing a good standard of accommodation.”

“What we’re seeing is a clear disconnect in the private rental sector. 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.

“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.”