Demand is high and average yields rising for UK private rental sector

Almost all private sector residential landlords in the UK say demand is high and average yields have increased, according to the latest survey from buy to let lender Paragon Mortgages. As a result there has been a sharp rise in buying intentions and 30% of landlords say they are more optimistic.

Almost all of the landlords, some 93%, that took part in the PRS Trends said that tenant demand was either stable or growing. In the next 12 months landlords are expecting little change in demand for rental property, with 86% believing it will continue to grow or at least remain stable and just 6% saying that it will decline.

Those landlords surveyed also reported an increase in average rental yields, rising to 6.4% from 6.2% in the first quarter of 2013 while professional landlords reported an average yield of 6.6%. However private investor landlords saw a more significant increase from 4.7% to 5.2%. There was a sharp increase in buying intentions too, with 19% expecting to make property purchases, up from 13% in the first quarter. The survey also shows that the most popular property investment choice for landlords was terraced houses, followed by flats and maisonettes.

Quote from : “UK house price growth continued to gain momentum last month, rising by 0.3% compared with the previous month and taking annual price growth to 1.9%. It means that the typical price of a home is now £168,941, according to the latest index from the Nationwide Building Society.”

Levels of optimism remained consistent in the second quarter of the year with 30% of landlords saying that they are more optimistic about the prospects for their property portfolio, the same level reported in the first quarter. ‘This long running survey is designed to improve our understanding of changes in landlord sentiment, motivation and outlook and the second quarter results paint a picture of a strong, confident and growing market,’ said John Heron, the firm’s director of mortgages.

‘Landlords are consistently seeing strong rental demand, and on the back of better availability of buy to let mortgages they are planning to buy more property, which should improve the supply of property to tenants, thus easing some of the pressure that has been building,’ he explained. ‘Nevertheless, tenant demand continues to remain high, and I suspect this will remain for some time as we wait for more significant improvements in the wider housing market and also for the various government schemes to take hold and have an impact,’ he added.

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