Landlords predict rapid growth in tenant demand

A third of all landlords believe that tenant demand is currently experiencing rapid growth, up from just over a quarter at the end of 2007, according to research from specialist buy-to-let lender Paragon Mortgages.

This is the highest proportion since Paragon introduced this question into its Trends survey in May 2004.

A further 58% of landlords believe that demand is currently strong and stable. Only 7% of landlords think there has been any decline in tenant demand recently.

John Heron, director of mortgages at Paragon, commented: ‘Our landlords are optimistic about the level of demand from tenants. Young people are choosing to remain in rented accommodation for longer due to the uncertain housing market outlook. This is definitely placing pressure on the stock of private rented homes available.’

According to ARLA, the proportion of landlords who think that demand for private rented homes outstrips supply is at its third highest level on record, at 50%. However, in London and the South East, this number rises to 52% and 59% respectively.

The tough borrowing conditions now faced by people looking to get onto the property ladder will continue to cause them to delay property purchase. As such, Paragon’s research shows that 48% of landlords expect tenant demand to increase further over the next twelve months.

John Heron continued: ‘The shortfall of available rental properties is particularly felt in London and the South East because they’re hotspots for young professionals. Increasingly this demographic either can’t afford, or don’t have the confidence, to commit to home purchase.’

John Heron concluded: ‘Despite much hype to the contrary, professional landlords enter into their investments with a long-term outlook and they will continue to provide a home for these people. New Capital Gains Tax rules and cooling property prices will not deter them from the market while tenant demand is high and strong rental incomes generate attractive returns. Supply as a whole will not weaken, but in comparison to demand it is already under strain. Landlords must take the buying opportunities that a cooler market offers to ensure the supply/demand imbalance does not spiral out of control - at a difficult time for the housing market buy-to-let will play a vital role.’