The number of landlords hit by rent arrears has fallen to a record low, with most continuing to report profitable lettings businesses.

In the second quarter of the year, 26% of landlords reported experiencing arrears during the past 12 months - down by four percentage points from the first quarter and marking the lowest level recorded by the long-running Landlord Trends report.

Alongside record-low arrears, 86% of landlords reported making a profit, says Paragon Bank, up by two percentage points on the previous quarter, while it found average gross rental yields reached 7% during the second quarter of the year.

Meanwhile, the latest ONS figures show average UK monthly private rent increased by 3.7% to £1,393 in the 12 months to July - up from 3.3% in the 12 months to June.

Increased

Average rents increased to £1,451 (3.8%) in England, £843 (4.5%) in Wales, and £1,016 (1.7%) in Scotland, while in Northern Ireland, rents increased to £875 (2.3%), in the 12 months to May. In England, private rent annual inflation was highest in the North East (6.3%), and lowest in the South East (2.9%).

Lisa Steele, mortgage lending director at Paragon Bank, says its findings indicate a sector that continues to demonstrate resilience despite a challenging backdrop.

“It’s understandable that landlords remain cautious about factors such as the wider economy and future market conditions,” she adds. “However, when they look at the performance of their own portfolios, the picture is generally much more positive. Most tenants continue to meet their rental commitments, most landlords report operating profitable businesses and those are the factors that have the greatest influence on day-to-day confidence.”

Properties

With an average of just 12 properties per branch, compared with 98 prospective tenants, according to Propertymark – along with the Renters’ Rights Act – it means landlords are thinking differently about their portfolios, being much more strategic and moving beyond expansion for its own sake, according to Alex Upton, MD at Hampshire Trust Bank.

“Strong tenant demand does not automatically make every acquisition a good investment, and professional landlords are increasingly discerning about where they put their capital,” says Upton. “We’re seeing more focus on which properties genuinely strengthen a portfolio, where income is more resilient and where there is a clear case for further investment.”

‍