Almost nine in ten landlords have made profits from their lettings activity, reporting an increase of 2% in Q3 2018 from the previous three months.
The research found that active landlords have not experienced any increased financial difficulty this quarter, with the overall landlord profitability index reaching an historic high of +85.
However, landlords are feeling less confident year-on-year when it comes to the prospect of capital gains and the UK financial markets. Landlord confidence in their own letting business remains 7% above the historic low of 36% recorded in Q2 2017.
Head of BM Solutions, Phil Rickards, said that for those speculating about the future of buy to let, the figures supporting tenant demand should help to dispel this myth.
He added: “Considering the much talked about shortage of housing supply, it is vital that we continue to support a healthy private rented sector (PRS) and with tenant demand scores improving or remaining stable across all UK regions, it is clear that the PRS still has a very important part to play.”
The average rental yield dropped this quarter from 6.2% to 5.9%. This follows the 0.4% rise recorded in Q2, when average rental yields were at their highest point since Q4 2014.
Landlords operating in the North West and Wales are currently generating the highest yields at 6.7% and 6.3% respectively. Rental yields are the lowest in Central London, standing at 5.3%, and Scotland at 4.7%.
Meanwhile, tenant demand has increased to the highest level recorded since Q2 2017, but there are regional variations.
The proportion of landlords reporting a drop in tenant demand is now at its lowest point since the end of 2016, falling 8% from last quarter. Central London has seen a 9% rise in the proportion reporting increasing demand for rental properties, and a 14% fall in the number of landlords who feel that demand has decreased in the last three months.
Rent and mortgage interest increases
A third of landlords raised rents over the past 12 months, representing a slight increase from Q2 2018.
There has also been an increase in the proportion planning to increase rents in the next six months, reaching 27% from 24%, while there has been a fall of only 4% in landlords planning to reduce rents.
More landlords are also seeing rents rising in the areas where they let properties, with an increase of 9% from Q2.
Four fifths of landlords expect their mortgage provider to increase their mortgage interest rate due to recent base rate rises.