More evidence that some buy to let investors are reducing portfolios

Small-scale landlords and those with the very largest portfolios appear to be ‘resizing’ - selling off some units to cope with the increased tax burdens on the sector.

That’s the verdict of Paragon Mortgages’ latest survey of the buy to let sector, involving interviews with 203 long-standing investors.

Paragon says that landlords with between six and 20 properties in their portfolio have increased from 35 per cent to 39 per cent of those surveyed; this follows a drop in the proportion of landlords in the three to five property bracket at the end of 2017.

Landlords at the very top end have also been resizing, with the latest survey recording a fall in landlords with over 50 properties, down from six per cent to four per cent, and an overall reduction in the average portfolio size from 13.1 to 11.6 properties.

Paragon says portfolio resizing appears to be one of a variety of tactics being adopted by landlords to adapt to regulatory and fiscal changes in the buy to let sector, with reductions in portfolio gearing and rent increases also playing an important role.

Average portfolio gearing which measures the loan to value ratio of a property portfolio, reduced from 35 per cent to 32 per cent compared with three months ago, falling from a peak of 43 per cent in 2012 to hit its lowest level since Paragon’s annual survey began in 2001.

Meanwhile, almost a quarter of landlords reported that they had increased rent in the last three months. They also said they were spending an increased proportion of their rental income on mortgage costs, up to 30 per cent of income from 26 per cent at the end of 2017.