One in five landlords are set to reduce the number of properties in their portfolio over the next year, the quarterly BM Solutions / BDRC Continental Landlords Panel survey found.

Landlords with 11 or more properties are the most likely to reduce portfolios.

It comes as tenant demand dropped to a five-year low in the third quarter, with only one in five landlords reporting an increase.

Demand was strongest in the East Midlands, Yorkshire and the Humber, but in London and the South East more landlords reported tenant demand to be falling than increasing.

Landlord confidence bounced back from all-time lows in the three months to October, but remained at low levels.

Optimism in the the private rental sector has been hardest hit, with sentiment down 17% in Q3 2017, compared to the same period last year, according to the BM Solutions survey.

Around half of landlords were found to be confident in the prospects for rental yields – little changed quarter-on-quarter.

The average rental yield in Q3 remained stable at 5.8%, with landlords in the East Midlands currently seeing the biggest returns, while London had the lowest.

Confidence edges higher

Landlord optimism about their own business increased by 5% in the third quarter of 2017, from the previous three months. And sentiment towards Britain’s financial markets edged up by 4% quarter-on-quarter, but was still down 13% year-on-year.

Phil Rickards, head of BM Solutions, said: “The latest report shows that landlords are starting to feel more optimistic following a period of declining confidence during the past 12 months.

“Key measures, especially for their own business have improved from the last quarter, with profitability remaining high. More than eight in 10 landlords are making a profit from their lettings business,” he added.