Confidence among landlords has improved in the last year with many feeling confident about the opportunity for capital gains on their properties, new research published by Foundation Home Loans has indicated.

The findings also suggested that landlords are confident about the prospects of the private rental sector (PRS) and the UK financial market as a whole.

Foundation’s latest research, which was undertaken on behalf of the specialist lender by BVA BDRC, comprised of 398 online interviews with landlords and covered the final quarter of 2023.

The study’s quarter-on-quarter results indicated that landlord confidence in their own lettings business remains stable, with rental yields the only metric to dip quarter-on-quarter.

This fall in rental yield confidence stemmed from a perception that tenant demand has decreased for the first time since Q2 2022. Foundation found that three in five landlords (63%) reported increased tenant demand in the last three months, which was a level down from 71% in Q3.

Director of sales at Foundation Home Loans, Grant Hendry, said there is a “renewed sense of calm and stability” from the lender’s latest set of landlord results.

“While it’s clear there are still some considerable concerns for active participants in the PRS, it’s positive to see confidence generally rising across most of the metrics,” Hendry commented.

“After a very challenging year in 2023, it’s perhaps not surprising to see landlords being somewhat cautious about what the future might bring, particularly in terms of ongoing finance, but also tenant demand, rental yield, and capital increases.”

Hendry also highlighted that tenant demand running at high levels, coupled with the supply situation and the need for landlords to cover larger mortgage costs, has resulted in rents risen significantly in many areas across the UK over the past 12 months.

He added: “Those fundamentals aren’t really changing, but they have clearly steadied somewhat, and while there will continue to be a large number of landlord borrowers coming off their deals throughout 2024 and beyond, the rate environment has shifted which should hopefully allow them to meet affordability criteria, secure the levels of loans they need and keep any increases in mortgage payments down.”

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