The government recently introduced tougher regulations on buy to let landlords, which were designed to free up more homes for first time buyers and curb spiralling house prices.Many financial analysts claim that this policy has had some unintended consequences.

The stamp duty increase, reduction in tax relief on commercial mortgage interest payments, and new affordability rules that affect the borrowing of portfolio landlords, have made it more difficult and costly for buy to let landlords.

Faced with income reductions, many landlords have increased rents. Although rent rises are not high, averaging 3.1%, this has caused first time buyers to take longer to save for a deposit on their first home. Richard Waind, director of property website Your Move, commented:

“We are starting to see the real impact of the Government’s tax changes. The outcome has pushed up prices for tenants.”

Many rented homes are now owned by limited companies because companies pay less tax on property portfolios.

Some landlords have sold their properties and stopped being landlords. Research by estate agents Countrywide has revealed there are now 3.56 million private landlords in the UK compared to 3.72 million in 2015. The average number of houses that landlords own has increased to 1.44, the highest since Countrywide first started researching the market in 2010. There has been an increase of 170,00 more privately rented properties compared to 2015.

If house prices and rents continue to rise, buy to let investments can be profitable despite the government changes.