After a period of economic instability and a challenging regulatory landscape, we’re seeing signs that things are on the up, with something of a renewed sense of optimism throughout the sector.

The long nights and short days of winter can naturally make things feel a bit gloomy, but for the buy-to-let market brighter days seem ahead.

There is something of a renewed sense of optimism throughout the sector. IMLA’s recent Q3 Mortgage Market Tracker suggested intermediary confidence in the outlook for the mortgage industry was improving.

And it’s not just brokers; interviewing almost 800 landlords as part of research carried out for our quarterly PRS Trends report also reveals a real uplift in confidence.

We asked them to tell us how they felt about the future for different areas of operating a lettings business – capital gains, rental yields, the UK financial market, the UK private rented sector, and their own letting business.

Compared to the first half of the year, Q3 saw a significantly higher proportion saying that they felt ‘good’ or ‘very good’ across all aspects, with landlords now more optimistic compared to the same time last year too.

Confidence in the UK financial market was the only area that didn’t record a noticeable increase, with the proportion feeling optimistic growing by a more modest 2-percentage points. While this is unsurprising given the fact that the Bank of England’s base rate increases are yet to bring inflation down to the Government’s 2% target, it’s an area where we do expect improvement due to several barometers suggesting we’re past the peak of recent fiscal instability.

The Guardian recently reported how one of the most up-to-date of these, the S&P Global CIPS PMI composite output index, had the first positive reading in four months.

One of the key factors influencing the more optimistic outlook amongst landlords is the continued strong demand for rented homes, with the previous record levels of tenant demand reported earlier in the year surpassed in Q3.

Unfortunately, not matched by supply, this demand is a contributing factor to rental inflation, which ONS estimates has increased to 6.1% in the 12 months to October 2023, up from 5.7% in September.

This doesn’t appear to have had a widespread negative impact on tenants, however. A 2-percentage point reduction in the proportion of landlords reporting tenants falling into rent arrears was noted in Q3, alongside an approximate £300 reduction in the amount owed by each tenant.

The quarter also saw yields stabilise after a slight increase in the previous three months, something that contributed to Q3 seeing the highest levels of landlord profitability so far this year.

Encouragingly, these factors appear to be starting to influence landlord investment appetite; our report also reveals that they are less likely to reduce the size of their portfolios compared to the previous five waves of research.

In addition to the improving fiscal picture, attitudes towards the sector appear to be changing, something that will no doubt help to add to a sense of positivity after years of anti-PRS policy and sentiment.

Announcing the decision to “relax the pace” of changes to PRS energy efficiency requirements, housing secretary, Michael Gove, said too much was being asked of landlords.

In the time since we asked landlords to share their views on the PRS, Gove has also announced substantial adjustments to the Renter’s Reform Bill which suggest that government is waking up to the importance of the PRS and the need to remove barriers to private investment in UK housing.

Section 21 legislation will not be removed until courts are reformed, offering landlords assurances that they would be able to regain possession of properties and a new ground for possession will also be created to enable landlords serving the student market to list properties in time for the next academic intake.

These are relatively small mercies in an otherwise challenging environment in which to operate a small business but I’m sure will be welcomed nevertheless.

With the mainstream media seemingly intent on writing off the PRS, something that I imagine will have some negative impact on both brokers and landlords, it is important to see both sides. Looking beyond the sensationalism you’ll see reasons to be positive and that the sector is more resilient than some headlines suggest.

Richard Rowntree is managing director mortgages at Paragon