Landlord confidence has improved over the course of the last quarter, latest BVA BDRC research finds.

The improvement across several different metrics has been attributed to a rise in tenant demand as landlords see strong performance from their own letting businesses, increase rental yields and a better private rental sector (PRS) as a whole.

Another indicator for growing confidence is the government’s announcement in September not to take forward plans to introduce mandatory EPC levels at C and above for all PRS properties.

Twelve percent of landlords said the announcement meant they would be “able to stay in the UK rental market”.

The BVA BDRC Landlord Panel research report, undertaken on behalf of lender Foundation Home Loans, was published today (15 November).

It found that the number of landlords who said they were planning to divest some, or all, of their portfolio in the next 12 months, has dropped from 37% in Q2 to 28% in Q3.

Eight percent of all landlords said they planned to increase the size of their portfolio over the next year. And larger portfolio landlords said they would be more likely to purchase.

While 18% of landlords with over 20 properties said they would be adding to portfolios in the next 12 months.

The intermediary-only specialist lender said the fall in the number of those landlords planning to divest, coupled with larger portfolio landlords seeking to acquire, stemmed from a number of key factors, particularly perceived tenant demand.

And 71% of landlords surveyed reported an increase in tenant demand, up by 4% since the last quarter and reaching an all-time high.

Only 3% of landlords reported a decrease in tenant demand.

The increase in tenant demand, coupled with ongoing supply of PRS properties, meant the proportion of landlords who had seen rising rents in the last year was up 5% on the last quarter’s results.

Rental yield also increased quarter-on-quarter, up by 0.1% to 5.3%.

Landlords in the East Midlands reported the highest rental yields this quarter at 6.5%, while those in London (both outer and central) achieve the lowest yields, sitting below 5%. Landlords with the largest portfolios achieve the highest rental yields at 6.2% on average.

The research, comprised of 785 online interviews with landlords, was conducted between September and October this year.

Foundation Home Loans director of sales Grant Hendry said: “It’s clearly good news to see a significant shift in positivity from landlords across a number of aspects, and to see confidence having risen quarter-on-quarter.

“Certainly, overall strong tenant demand is playing a major part here, as perhaps is the belief that mortgage rates may now have topped out, and that the market is finally shifting southwards, with more competitive rates meaning stronger affordability.

“While it is too early to say whether we are seeing the start of a new trend line, there appear to be many more landlords feeling optimistic about their future within the PRS, and if this means landlords can keep much-needed housing supply available to tenants, then this can only be viewed as a positive.”