Tax and regulatory changes are deterring buy-to-let investors with net investment slumping 80 per cent in just two years, figures have shown.
A report from the Intermediary Mortgage Lenders Association (Imla) stated net investment in buy-to-let property has fallen from £25bn in 2015 to £5bn in 2017.
The association blamed the tax and regulatory changes for the slump in investments, which has deterred landlords from maintaining levels of investment in the private rental sector.
Kate Davies, executive director at Imla, said a period of policy consolidation is needed to assess the impact of recent changes, before further "punitive action is contemplated.
She said: "Various interventions by the government have been aimed at encouraging more first-time buyers and making investment in buy-to-let less attractive to existing and potential landlords.
"But the private rental sector plays a vital role in our housing supply and it is essential that a sensible balance is struck, if tenants are not to be disadvantaged by shrinking stock and higher rents."
In the last two years, the government has introduced several changes to the tax regime surrounding buy-to-let properties, in the hope that this would make it easier for first-time buyers to compete with landlords.
These include a stamp duty surcharge for those buying buy-to-let property and the removal of mortgage interest tax relief.
Ms Davies referred to these changes as policy layering and said that they have far-reaching effects that are still yet to be fully realised.
She said: "We urge the government to reassess the impact of the recent far-reaching regulatory changes to buy-to-let investment and allow a period of policy consolidation.
"Our nation's private rental sector investors provide a vital service that is vital to millions of UK tenants.
"We need to support and protect a sector that does so much for so many."
Andrew Turner, chief executive at specialist buy-to-let brokerage Commercial Trust, said there are a number of significant factors impacting the buy-to-let market at present.
First, he said there is the macro-economics of Brexit.
Mr Turner said if businesses pull out of London and move to continental Europe, there are significant implications for the capital growth potential of property in the city.
Therefore, where in the past London's property market has gone from strength to strength, Mr Turner said this has been significantly tempered as investors wait to see what the outcome of the exit from Europe will be – and the wait will not be over for some time.
Mr Turner said: "With so many changing factors to consider, when planning investment strategy, it is unsurprising that the industry is feeling shell-shocked.
"However, lenders within the buy-to-let mortgage space have responded in kind, rates remain low – even over 10-year fixed periods which can see investors through a considerable period of uncertainty - and as one of the biggest brokers in the UK we are well placed to find workable solutions for our clients."
