Student landlords lead the way as sector sees profits surge

Landlord profitability has reached its highest point since early 2022 - and student lets are leading the way, Paragon Bank reveals. 

It found that landlords with student tenants are the most likely to be profitable. 

Paragon says a staggering 91% of student landlords are reporting positive returns. 

After student tenants, the most profitable tenant type are families with children (88%) and couples (87%). 

87% reported making a profit 

The bank surveyed more than 700 landlords and found that nearly nine in 10 (87%) reported making a profit in the third quarter of 2024. 

That's the highest level since the first quarter of 2022. 

This increase in profitability highlights the market's stabilisation over the past 18 months, the bank says. 

Landlords have astutely managed their businesses 

The bank's commercial director for mortgages, Russell Anderson, 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." 

He adds: "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." 

Overall profitability in Q3 2024 is seven percentage points higher than the same period in 2023, following consistent quarterly growth over the past year. 

Landlords reported making a large profit 

The survey found that 17% of landlords reported making a large profit, while 70% made a small profit.  

The proportion of landlords who incurred losses fell to 4% from 6% in Q2 and 8% in the same period last year.  

Paragon says that the remaining 9% of landlords broke even. 

The highest net returns 

Regionally, landlords in the East of England reported the highest net returns, with 90% making a profit.  

The South West and East Midlands also saw above-average profitability, with 89% and 88% of landlords, respectively, reporting profits. 

When examining profitability by tenant type, those renting to students were the most likely to be profitable (91%). 

The next most profitable tenant types are families with children (88%) and couples (87%). 

'Student landlords have effectively navigated the challenges' 

Simon Thompson, the managing director of Accommodation for Students, said: "These findings demonstrate that student landlords have effectively navigated the challenges of rising costs and are now reaping the benefits of a stabilising market. 

"The strong demand for student accommodation continues to drive profitability." 

He added: "As the economy improves and inflation falls, student landlords can look forward to sustained profitability - making this an opportune time to invest in and manage student rental properties. 

"Though there are some issues on the horizon, such as the Renters' Rights Bill, the level of profitability is going in the right direction."