Confidence is said to have dropped after the survey found that 42% of landlords believe now is a good time to invest in property, down from 48% in the first quarter of the year.
Total annual returns from buy-to-let investments also fell in July, to 10.1%, down from 13.2% in April, while the recent levelling off of house prices means an investor buying property now could expect a total annual return of 3.5%, or £5,838.
David Brown, managing director of LSL Corporate Client Department, said that rising rents and house prices had inflated the annual returns available to landlords at the start of the year, but the recent slowdown in house prices and the capital gains tax hike had seen confidence drop.
However, growing tenant demand was said to be helping to cushion the blow of slowing capital gains.
With mortgage finance remaining a daunting obstacle for first time buyers looking to get a foot on the property ladder, Mr Brown said that thousands of frustrated buyers were being kept in rented accommodation, pushing up tenant demand and rents.
However, even though the latest Council of Mortgage Lenders data showed a 13% increase in the number of buy-to-let loans over the past quarter, Mr Brown warned that borrowing remained ‘a thorn in the side’ of potential investors too.
"Despite a slight easing in lending in the last quarter, mortgage finance constraints are hitting landlords," he added. "Funding conditions remain tight for lenders, and lending to landlords won’t loosen significantly in the next two years."
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