Tenant Demand Still Rising

The demand for rental property is still rising even though mortgages offer good value, but are hard to obtain.

Landlords experienced a strong demand for their properties during the first quarter of this year, Paragon Mortgages found in their latest Private Rented Sector Trends Report.

Nearly half of landlords questioned in the survey were seeing a strong demand from prospective tenants, whereas only 5% had seen a fall in interest from tenants.

This is the seventh consecutive quarter in which tenant demand has grown and reflects a continued lack of availability of mortgage finance and an inability of first time buyers to climb onto the first rung of the property ladder.

This is why it is landlords expanding their portfolios rather than first time buyers who are underpinning house prices in many areas.

Although this trend to renting rather than buying looks set to continue, even with rent being more expensive than mortgages at the moment, the growth of the private rental sector will be constrained by the lack of availability of buy to let mortgages, as Nigel Terrington, Paragon Group Chief Executive points out:

“We are seeing evidence that strong tenant demand is feeding through to higher rents. A lack of available mortgage finance is restricting the sector’s ability to expand and needs to be addressed to create a healthy and vibrant buy-to-let market in the UK.”

Landlords have seen an increase in yields, which now stand at an average of 6.2%, the highest level since Q4 2009. This is in part due to the market sustaining higher rents and also to the fact that void periods have fallen to 2.8 weeks per year.