The prospects of reduced returns over the next five years are likely to lead to a period of consolidation and a slowdown in the growth of the buy to let sector.
According to Savills’ latest buy to let survey, despite this slowdown there will not be a significant withdrawal from the sector.
This is due to the fact that the majority of owners view their investment as long term, with 55% of owners looking to retain their portfolio for at least 10 years.
There is also a dominance of large investors with an equity interest in their property holding, and the majority of owners are meeting existing borrowing costs out of rental income.
The survey of 400 buy to let investors found that two thirds were actually looking to increase the size of their portfolio.
The report concludes that the risk of an exodus is limited, particularly with the potential for further interest rate cuts and some rental growth.
Jacqui Daly, from Savills research, said: “We expect this slowdown in the expansion of the sector to be accompanied by a change in the profile of properties acquired by buy to let investors.
“There will be a shift away from new build flats where returns are likely to be under the greatest pressure.
“Whilst 55% of owners own new build flats within their portfolio, only 24% of respondents would look to expand their portfolio by acquiring this property type.”
