According to a report by Paragon Mortgages, the average size of a landlord’s portfolio increased by +4.2% to £1.43m in Q4 2009, the first increase since the same quarter of 2008, as 21% of landlords look to increase their portfolio in 2010, with an overall increase of +2.1% expected.

Nigel Terrington, Paragon Group’s chief executive, said: “Landlords enjoyed a strong end to the year and enter 2010 with a solid platform on which to build. Last year was one of stability after the volatile events of 2008 – arrears declined, tenant demand grew and rental incomes strengthened.

“Landlords also reported growth in the value of their property portfolios, whilst the level of tenant arrears fell. Confidence in property investment can be seen in the number of landlords looking to expand their portfolios this year. PRS Trends shows that one in ten landlords is planning to purchase in the first quarter of 2010, but unfortunately investors continue to be hampered by a lack of available buy-to-let mortgage finance.”

A quarter of landlords said that tenant demand continued to grow due to a slow housing market whilst only 13% said it had declined, despite a continuation in positive net migration and ever increasing student numbers creating strong demand.

Tenant demand is also expected to further increase during 2010 with 36% of landlords stating that they expect it to end the year higher than the current level, with just 7% predicting that demand will go down.

Lack of mortgage finance is causing a serious issue for residential investors with 68% of landlords having difficulty securing finance in Q4 2009 compared to the previous three months.

Terrington said: “Those who tried to secure mortgage finance in the final quarter of the year, nearly seven out of 10 said it was more difficult than in the third quarter. Without a significant increase in product availability and an easing in lending criteria, we cannot see this situation improving in the first quarter of 2010.”

However, one in ten landlords plan to purchase property in the first quarter of 2010, with 65% looking to buy a terraced property, 25% are after semi-detached houses, 20% want flats and just 10% are looking for detached houses.