Landlord profitability surged in the third quarter of 2024, reaching its highest level since early 2022, according to new research from Paragon Bank. The findings, based on a survey of over 700 landlords conducted by Pegasus Insight, highlight that nearly nine out of 10 landlords (87%) reported making a profit in Q3 2024, signalling a stabilised rental market over the past 18 months.
Profitability continues upward trend
The report shows that overall profitability for landlords in Q3 2024 is seven percentage points higher than in the same period last year, demonstrating a steady increase across consecutive quarters. This figure includes 17% of landlords who reported making a large profit and 70% who reported a small profit. The number of landlords reporting a loss has also decreased, down to 4% from 6% in Q2 and 8% in Q3 2023. Additionally, 9% of respondents said they broke even.
Regional and tenant-specific profitability
The East of England led in profitability, with 90% of landlords in the region reporting profits. Landlords in the South West and East Midlands also experienced above-average profitability, with 89% and 88% reporting positive returns, respectively.
When considering tenant types, landlords letting to students reported the highest profitability at 91%. This was followed closely by those renting to families with children (88%) and couples (87%).
Expert insight on profitability factors
Russell Anderson, Commercial Director for Mortgages at Paragon Bank, highlighted the resilience of landlords during challenging economic conditions. “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,” he said. “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.”
The positive shift in profitability provides evidence of the rental market’s recovery and stabilisation, offering optimism for landlords navigating an evolving market landscape. This trend underscores the importance of strategic management and adaptability, suggesting that, with continued economic growth and steady demand for rental properties, landlords can look forward to sustained profitability in the coming quarters. For property investors and landlords, the outlook points to renewed confidence, although staying informed and agile remains essential in managing future challenges.
