Paragon Bank research has revealed that landlords' profitability levels in the third quarter of this year have hit their highest point since the first quarter of 2022.
A survey of over 700 landlords, carried out on behalf of Paragon by Pegasus Insight, showed that, on average, 87% reported making a profit in Q3 2024, the highest since Q1 2022.
As evidence of the market’s stabilisation over the past 18 months, overall profitability in Q3 2024 is seven percentage points higher than in the same period in 2023, following successive quarterly increases over the past year.
The figure is made up of 17% of landlords who report making a large profit and 70% a small profit, on average. Additionally, the proportion of landlords who made a loss fell during the quarter, down to 4% from 6% in Q2 and 8% during the same period last year. The remaining 9% of landlords broke even.
Analysing the data at a regional level reveals that net returns are highest amongst landlords operating in the East of England, with 90% recording making a profit.
Above average levels of profitability were also achieved by lettings business owners in the South West and East Midlands, 89% and 88% respectively.
Meanwhile, by tenant type showed that those letting to students were most likely to be profitable (91%), followed by families with children (88%) and couples (87%).
Russell Anderson, Commercial Director for Mortgages at Paragon Bank, said: “While landlords have faced rising costs over the past two years, these findings support our belief that many have astutely managed their businesses to remain profitable and are now seeing improved returns.
“It’s likely that a key influence of this is the strong demand for rented homes against a backdrop of an improving economy as inflation has fallen.”
