More than half of landlords still believe residential property is a good long-term investment, but taxation is the biggest barrier preventing them from expanding their portfolios, according to new research from Benham and Reeves.

The survey of landlords in England found that 50.6% continue to view residential property positively as a long-term investment. Almost two-thirds (62.7%) plan to maintain their existing portfolio over the next 12 months.

Marc von Grundherr, Director of Benham and Reeves, said: “The issue isn't that landlords have lost faith in property. Almost two-thirds intend to maintain their existing portfolios and, amongst those looking to expand, long-term investment planning is by far the most common motivation.

“The problem is that the environment in which landlords are being asked to operate has become substantially less attractive.”

However, only 3.9% intend to expand, while 13% plan to reduce their holdings and 14.2% expect to leave the rental market altogether. In total, 27.2% are planning to reduce or exit the sector, compared with fewer than one in 25 looking to grow.

Profitability is also a concern, with 38.9% expecting returns from their buy-to-let portfolio to fall over the next year, compared with 7.6% expecting an increase.

Taxation was identified as the biggest barrier to further investment, cited by 28.3% of landlords, ahead of the Renters' Rights Act and wider regulation at 15.1%. More favourable landlord taxation was also the most common change that would encourage further investment, cited by 36.9%.

More than three-quarters of landlords, 78.5%, said buy-to-let is less attractive than it was five years ago.