A significant majority (84%) of residential limited company landlords expect rental yields to increase over the next 12 months, says a mortgage firm. 

The findings reveal strong underlying optimism in the UK rental market, with nearly nine in ten landlords (89%) feeling confident about the outlook for the year ahead. 

Four out of five (80%) are expecting rental demand to rise, while more than three quarters (77%) anticipate property prices to increase over the same period.

Nevertheless, landlords are also bracing for sustained cost and regulatory pressures. 

Over three out of four (77%) expect mortgage costs to increase, while 81% report that their running costs – including repairs, insurance, utilities, and maintenance – have risen over the past year. Meanwhile nearly four in five (79%) believe the regulatory environment will become more challenging.

Interest rates were cited as the single biggest factor influencing landlord confidence (31%), followed by regulation (26%), property prices (25%), and rental demand (25%). The wider economic outlook (22%), mortgage availability (22%), and taxation (20%) were also highlighted as key considerations.

Despite these evolving conditions, most landlords are holding firm on their investment strategies. 

Over half (53%) plan to maintain the size of their portfolio over the next 12 months, while almost four in ten (38%) intend to expand. Just 8% are considering reducing their holdings. Encouragingly, most landlords (74%) said they currently find it easy to access BTL mortgage financing.

Kensington Mortgages’ research also shed light on portfolio structure and strategy. 

Over half of limited company landlords (53%) hold their entire portfolio within the limited company structure. Landlords who also had personal holdings reported gross rental yields of 5.04% from their limited company portfolios on average, compared to 4.88% from personally held properties, highlighting the financial advantages of the limited company structure. 

Residential properties for families (40%) are the most common asset type in landlord’s portfolios, followed by HMOs with six bedrooms or more (35%), single-tenant residential properties (33%), and HMOs with less than six bedrooms (27%), with holiday (16%) and student lets (12%) proving less popular options. 

In recent years, landlords report primarily increasing their holdings of family homes (21%), single-tenant homes (20%), and HMOs with six or more bedrooms (16%).

Looking ahead, almost all respondents (95%) said they are looking to diversify into different property types. 

Corporate lets top the list (37%), followed by HMOs with six bedrooms or more (18%), family homes (17%), and single-tenant properties (13%).