Paragon Bank has found that landlord confidence rebounded strongly in the third quarter of the year, with optimism now higher than at the same period last year.

All aspects of landlord confidence measured by research agency BVA BDRC improved compared to the second quarter, driven by more stable market and economic conditions.

The most notable uplift of 16 percentage points since Q2 2023 could be seen in the outlook for rental yields, with 49% of landlords rating their expectations for this aspect of their lettings business as either good or very good in Q3. This links to an increase of 11 percentage points in the proportion of landlords who are confident in the prospects of their own lettings business, the second largest rise.

Landlord confidence in the private rented sector increased by eight percentage points compared to the second quarter of the year, while expectations for capital gains climbed by six percentage points.

The research of almost 800 landlords highlighted how optimism for the UK financial market was more muted, experiencing a more modest increase of two percentage points.

These figures mean that landlords are more confident about all aspects of letting, with the exception of capital gains, compared to the same period in 2022, particularly with respect to rental yields and their own lettings business.

Richard Rowntree, Paragon Bank’s managing director of mortgages, said: “It’s great to see a lift in optimism amongst landlords, reflecting some of the stability that we’ve seen return to the market and economy more broadly.

“Landlords play a vital role in the UK’s housing provision, so it is important that they feel confident in the investment environment, particularly at a time when demand continues to outstrip supply. Although there is still work to be done on all sides as we work to improve the PRS for both tenants and landlords, we’re encouraged by signs that the value of private investment is being recognised by government. I imagine that recent policy announcements will have had a positive influence on how landlords see the prospects for the sector and their businesses.

“It’s also worth noting that this research was undertaken before it was announced that the removal of Section 21 would be delayed until court reforms and a new ground for possession for student landlords was created. These are both significant changes to the Renter’s Reform Bill that will likely be welcomed by landlords so could add to the more positive outlook.”