Buy-to-let investors will come under growing pressure as Help to Buy gets more tenants onto the property ladder and the rising supply of rental property squashes rents.
Many would-be buyers have been forced to rent in recent years due to difficulties in obtaining mortgage finance, pushing up rents and attracting more investors into buy-to-let.
But George Spencer, chief executive of online landlords service Rentify, has warned that 2014 could be tougher for landlords. "We saw strong demand for rental property in 2013, pushing up rents.
"This has encouraged investors into the market, viewing bricks and mortar as more attractive than savings accounts or equities, given historically low interest rates and returns.
"The rise in the number of landlords should result in more rental property becoming available in 2014, which will curb some rent rises.
"We expect rents to plateau more in 2014 in line with inflation figures, although London is truly establishing itself as a micro-market, with its own rules.
‘In London, demand for rented housing is outstripping supply and rental pricing is on an upwards trajectory. This will force more tenants to seriously consider buying as opposed to renting."
Landlords face plenty of other challenges in 2014, including more regulation, the prospect of letting agent licensing, proposals for landlords to carry out immigration checks, and calls for property rental and price controls, he said.
Spencer warned landlords against "hiking rates at every opportunity" to squeeze all they can out of their investment. "Our landlords prefer to maintain rents at the same level to keep loyal tenants, rather than hike rents and risk losing them. This results in void periods – every landlord's worst nightmare."
The supply of mortgages for landlords with multiple properties should improve next year, said Ying Tan, managing director of the Buy to Let Business.
"More lenders will take steps to attract professional landlords in 2014. Following the financial crisis, lenders became fearful of landlords with a large number of properties because of the risk involved, so they restricted the number of properties a landlord could have.
"However, lenders such as Santander and Accord have increased the number of properties a landlord can have in their portfolio, with other lenders expected to follow suit.
"We expect more lenders to reduce their rental cover calculations for mortgage payments, making it easier for landlords to get the numbers to stack up."
Kate Faulkner, managing director of Designs on Property, said: "2014 won't be the greatest year to buy unless you can bag a bargain. This might mean choosing a property the average buyer would overlook in areas where property values have only just recovered to 2007 levels.
"If you invested for income, make sure your property is still cash-flow positive if mortgage rates return to their ‘norm’ of 5.5%."
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