The number of landlords looking to purchase residential property for investment purposes in the second quarter of 2010 has increased to 12% according to Paragon Mortgages.

The number has increased by +2% from Q1 with terraced housing being the preferred option as 67% are intending to purchase this type of property, followed by 25% looking for semi-detached housing.

Nigel Terrington, Paragon Group’s chief executive, said: “Demand for property investment has remained strong during the recession and has improved since house prices stabilised. Landlords know that the long-term forecast for tenant demand is extremely healthy, with socio-economic and demographic changes leading to growth in the number of households calling the private rented sector home.

“Government figures show that the private rented sector is the only housing tenure that is currently growing. The proportion of households in both owner-occupation and social housing was in decline for the best part of the previous decade, and the private rented sector has picked up the slack. One in seven households now lives in privately rented accommodation.”

Tenant demand increased as 24% of landlords saw an increase compared to 8% who said it was declining, whilst 36% forecasted that they expect demand for their property to be higher in 12 months time.

The average value of a landlord’s portfolio increased for the second successive quarter as it rose by +6.1% during the period to £1.52m with it expected to rise by a further +1.2% in the next 12 months