One in three landlords are looking to expand their rental portfolios in the next year, even though tenant demand has fallen to its lowest level for three years.
Some 52% of landlords were reporting an increase in tenant demand at the end of 2011, but that fell to just 35% by the final quarter of 2013, according to the latest BM Solutions/ BDRC Continental Landlord Panel.
The proportion of landlords reporting 'no change' in demand has risen, however, and the sector's stability and profitability is encouraging more landlords to invest.
Eight out of 10 landlords continue to make a profitable full-time living from letting.
And three-quarters of amateur landlords who use a rental property to supplement their day job earnings more than break even.
Average tenant arrears have fallen to a three-year low of £1,499.
Some 34% of landlords reported at least one void period over the past three months, a fall of 2%.
The average void duration fell by five days to 59 days over the quarter.
Phil Rickards, head of BM Solutions said: “While there will always be elements of the rental market that fluctuate, overall stability will continue to ensure that lettings attract both professional and amateur landlords.
"By increasing portfolios, landlords are also able to further spread the risk of void periods and tenants in arrears, which is important when considering the long term investment rather than focusing on the short-term gains.”
The research also showed that confidence in the buy-to-let sector has fallen slightly from the six-year high reported last quarter, with 63% of landlords confident in the prospects for the future, down from 68%.
But optimism around capital gains and the broader economy continues to increase.
Average rental yield in the UK was static at 6% over the last quarter. That is a slight drop from 6.1% in the first two quarters of 2013.
Three out of five landlords who raised rents did so when new tenants arrived, with more than half doing so to bring their pricing in line with the local market.
The strongest performing region was the North West, with an average return of 6.4%.
London and the South West saw the lowest returns at yields of 5.6%.