Investors ditch shares for property as they turn to private rental market for higher yields.

Investors are moving away from the stock market and seeking better returns on their money elsewhere in the private rental market. Many private landlords own their property outright, having bought them with previously invested funds. Those becoming professional landlords with 20 or more rental properties in their portfolio are able to make a profitable full time living as expectations about the letting business remain upbeat and confident.

A study by BVA BDRC has surveyed private landlords investigating their reasons for owning property and their attitude toward the current private rental market. The Landlords Panel survey has demonstrated that landlords have become increasingly confident about capital gains on property: a third felt that property gave a better return than traditional investments. A fifth had other intentions, viewing the cash flow from letting the property as their income and their primary reason for investing. Long term investment and poor pension performance were mentioned as reasons for becoming involved in the private rental sector by 18% and 10% respectively, reflecting the number of landlords increasingly turning to the property market as part of their retirement plan.

Growing confidence in capital gains and interest in property has caused one in seven private landlords to add to their portfolio between July and September 2013. Almost a quarter planned to add to it in the next year. Buy to let mortgages tend to mirror landlord’s confidence in their own letting business performance and subsequently buy to let sales are at the highest level for four and a half years.

But ‘unencumbered’ landlords – those without mortgages who own their properties outright – made up a third of all private landlords. Two fifths of them had used money previously invested elsewhere to buy their properties, a sign that more and more are choosing property as a principal form of investment.

The Landlords Panel survey reveals the diverse interests driving the growth in buy to let sales, from those looking for a stable source of income during their retirement, to investors moving funds away from the stock market and into property, staying away from mortgages and developing new areas of investment.