Rental deposit replacement scheme Ome looked at the percentage of buy-to-let mortgage loans approved over the past five years as a percentage of all loans, using figures from the Financial Conduct Authority.
It found a gradual decline in the number of landlords entering the market with new stock every year since 2015, with an average annual reduction of 1 per cent.
Ome said the value of the buy-to-let market is now £35.6m, compared with £37.4m in 2015, as it predicted that a further fall in rental stock entering the market during lockdown could lead to higher rental and deposit costs for tenants.
Matthew Hooker, co-founder of Ome, said: “Through no fault of their own, agents and landlords are facing a very tough few months with some tenants unable to pay their rent and some landlords facing much longer void periods due to a drop in market activity.
“The buy to let market has already seen a notable decline in appetite following increases to stamp duty and changes to tax relief, with the number of buy to let mortgages declining steadily since 2016. It is no coincidence that rents have also climbed rapidly during this time."
Even before coronavirus the market had been impacted by rule changes, which meant landlords have been unable to deduct any of their mortgage expenses from taxable rental income from April 2020, receiving a tax credit based on 20 per cent of their mortgage interest payments instead.
An additional 3 per cent stamp duty surcharge on second homes was also introduced in April 2016.
A poll by Accumulate Capital last year found that 37 per cent of landlords were planning to sell at least one of their properties, with 61 per cent blaming increasing regulations and taxes.
Ome said growing demand had led to average UK rent rises of 4 per cent a year since 2015, with the average rent now stood at £743 a month, compared with £627 in 2015.
It said over the past five years the cost of a rental deposit had increased at a rate of 3 per cent per year.
Ome predicted that further increases this year would see the average rent reach £776, and deposits £900, despite the introduction of a five-week deposit cap in June 2019.
Additionally, the scheme predicted that any lasting reduction in rental stock caused by the coronavirus crisis could lead to a significantly larger increase in cost for tenants in the long run.