Spending across the private rented sector could fall by more than £500m each year as landlords plan to cut their mortgage costs and other outgoings.
More than a third of landlords are looking to reduce their annual spending, partly in response to the government’s stamp duty hike and tax relief reductions, according to research published by specialist lender Kent Reliance.
According to the lender landlords pump £15.9bn into the British economy through spending – double the amount they spent in 2007 – sparking fears their cost cutting could have a knock-on effect on other jobs.
The average cost of running buy-to-let property has jumped by a quarter since 2007 to £3,632 per year before tax or mortgage interest, accounting for a third of rental income.
Faced by mounting pressures, 36 per cent of landlords are already reducing or planning to reduce their spending, while one in five looking to raise rents.
Property upkeep and maintenance were the most popular area identified by landlords (17 per cent) for potential cost cutting, followed by letting agent fees and mortgage costs (both 10 per cent).
Those landlords anticipate they will reduce spending on letting agent fees by 28 per cent, property maintenance and servicing by 21 per cent and mortgage costs by 15 per cent.
The findings are based on a BDRC Continental survey of 657 property investors undertaken in January.
John Eastgate, sales and marketing director of OneSavings Bank, said: "Trying to tackle the housing crisis by targeting landlords with punitive taxes is very simple and politically highly palatable, but has unintended consequences.
“Either it means less work for all those who support the property industry, or it means tenants will have to foot the bill for the government's tax raid, or both.”
Martin Stewart, director at London Money, said: “All we are seeing right now is landlords exiting the market, considering exiting the market or re-evaluating their business model.
"We hardly see any purchases within London any more as a result of the recent changes in taxation and regulation.
“The idea of just putting the rents up by the landlord appear to be more of a hope than a reality.
"The market, from our point of view, appears to breaking up and will polarise into professional sectors - be they portfolio landlords, commercial and semi-commercial borrowers - as well as a few who may linger around in the hope that legislation will revert to the good old days.
"My advice to the latter would be to move on as quickly as possible."
simon.allin@ft.com
