The proportion of landlords feeling optimistic about the rental market is at the highest level for five years, according to Paragon.

A survey carried out on behalf of the bank asked landlords to rate their expectations for rental yields; the future of their own lettings business; capital gains; the private rental sector as a whole; and the wider UK financial market.

The proportion who deemed the outlook to be either “good” or “very good” exceeded levels seen in the Q3 2016 survey, taken just before the Brexit vote.

Investor optimism has been consistently rising following the record low levels seen in Q1 2020.

The survey of over 600 landlords by BVA BDRC highlighted a link between optimism and portfolio size, with landlords managing larger portfolios tending to be more upbeat about the prospects for their own lettings business.

It found that 56% of landlords with eleven or more properties felt “good” or “very good”, falling to 46% amongst those with between one and 10 properties.

Landlord confidence is reflected in purchasing decisions as 63% of those who have recently bought a property had an optimistic outlook, compared to 48% of the total survey sample.

Unsurprisingly, 78% of landlords who plan to expand their lettings business in the next year are optimistic, whereas confidence was seen in a lower proportion, 26%, amongst those looking to divest.

Paragon director for mortgages Richard Rowntree says: “Understandably, landlord confidence fell sharply in the first quarter of 2020, as the extent of the pandemic became clear.

“It is fantastic to see optimism bounce back and rise in the time since; it is an indication of the strength of the sector. 

“Landlords see the sector’s issues and opportunities on a daily basis so measuring their outlook can provide useful insight for the industry and, as we see here, investor confidence can have a real impact on behaviour.”