Landlords have been reshaping their portfolios as tax changes start to bite.
Paragon’s latest research into trends in the private-rented sector found the proportion of landlords who own between six and 20 properties had increased from 35 per cent to 39 per cent.
The research, which was based on interviews with 203 experienced landlords in the first quarter of 2018, also found a drop in the proportion of landlords in the three-to-five property bracket.
This group was down from 26 per cent to 24 per cent and Paragon said this indicated a growing polarisation between small-scale landlords and those with more substantial portfolios.
John Heron, managing director of mortgages at Paragon, said portfolio resizing appeared to be one of a variety of tactics being used 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.
He added: "Our latest survey demonstrates how tax and regulatory changes are beginning to drive changes in landlord behaviour, with evidence of polarisation between small landlords and those with more substantial portfolios beginning to emerge.
"Our own experience highlights that landlords with larger portfolios need access to products that cater for landlords with more complex requirements and broader underwriting expertise, increasing the role for specialist lenders in the buy-to-let market."
Landlords at the top end have also been resizing, with the survey recording a fall in landlords with more than 50 properties. This was down from 6 per cent to 4 per cent.
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 survey began in 2001.
Meanwhile 24 per cent of landlords said they had increased rent in the past 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.
Daniel Hodges, mortgage adviser at Suffolk-based Just Mortgage Brokers, said: “Landlords are now starting to see the impact of the new tax changes that are gradually being implemented and in turn looking to restructure their portfolios.
"Those with the larger portfolios will continue to see property as a solid investment and although restructuring of their portfolios is on the agenda it is perhaps no surprise that this sector of the market has grown.
"Those with the smaller holding will perhaps see the tax changes as a more relevant factor in their finances and the polarisation between these groups is likely one that will continue to develop.”