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According to the Business Development Research Consultants' (BDRC's) latest quarterly survey of more than 500 British landlords, the market is slowly getting better, with improved rental yields expected for the current quarter.

Overall 14 per cent of private landlords said prospects for the UK's private rental sector looked "very good", up from 10 per cent in the fourth quarter of 2007.

However, the percentage of landlords who are expecting very good prospects for rental yield over the next three months (18 per cent) is still not as high as this time a year ago (22 per cent). Although this is higher than last quarter.

The increased demand for rental properties and cheaper house prices have driven these measures up over the last three months, but the proportion seeing very good prospects for capital gains remains much lower than when the survey began in October 2006.

With the prospect of capital returns hardly increasing, the main focus for 60 per cent of private landlords is rental yield.

Of those surveyed, 17 per cent plan to increase rents before the end of the year by an average of 5.7 per cent and more than a third (38 per cent) had already increased rents in the past 12 months.

The availability of cheaper properties has also encouraged more private landlords to buy, with more than one in five stating their intention to buy before the end of the year.

However, not all landlords are benefiting from the situation. Only 63 per cent of those with one property are making a profit, compared with 96 per cent of those owning 20 or more rentals.

Not surprisingly, these landlords have the most confidence in the longer-term prospects of their property as an investment and 49 per cent of them are likely to be looking for additional borrowing in the coming three months.

Mark Long, client services director at BDRC, said: "There are certainly signs in our latest quarter's research that the financial situation is improving for private landlords, many of whom have either increased rents, or are planning to do so.

"An increased number of people looking to rent is good news for private landlords – but in such an uncertain market, who can tell if that optimism will last even to the New Year?"