Tenant demand continues to grow

Nearly three times as many landlords reported that tenant demand was rising rather than falling during the second quarter of the year, Paragon Mortgages' PRS Trends Report has revealed. The quarterly snapshot of the private rented sector and buy-to-let market shows that 29% of landlords recorded growing levels of tenant demand during the period, compared to 10% who said it was falling.

Both of these measurables increased compared to the first quarter of the year, when 24% of landlords reported growing tenant demand and 8% reported falling levels of demand. Tenant demand was stable for the majority of landlords during the second quarter (54%), whilst 7% said they were unsure which direction demand was heading.

Looking forward, landlords expect tenant demand to strengthen considerably. Over a third of landlords (35%) expect demand to be higher in 12 months' time, with 8% forecasting a decline.

Nigel Terrington, Paragon Group chief executive, says: ‘Tenant demand has been rising consistently for two years and shows no signs of slowing down. Would-be home buyers continue to be unwilling or unable to step onto the property ladder, whilst longer-term social changes, such as greater numbers of single person households and economic migrants, are also creating more demand for rented property.

‘Strong tenant demand is great news for landlords, but will lead to rental inflation for tenants unless the private rented sector is able to expand to meet this demand. Pressure is building on the finite number of properties in the sector because the lack of buy-to-let mortgage availability has prevented landlords from growing their property portfolios.'

The Q2 2010 PRS Trends Report, which covers the three months to June 30, also shows:

There was a significant increase in the proportion of landlords planning to purchase, with one in five (21%) intending to purchase during the third quarter of the year, up from 12% who said they wanted to purchase in the second quarter

Buy-to-let mortgage finance remained constrained. Four out of 10 landlords said that they attempted to secure buy-to-let finance for purchase or remortgage purposes during the second quarter, with 52% of those saying that it was more difficult than previous attempts to secure finance, with just 13% stating it was easier 

Both yields and portfolio values remained steady during the quarter at 6% and £1.5 million respectively

Landlords said that a wider availability of mortgage finance, tax incentives and sustained levels of tenant demand would encourage further investment in the PRS. Just over four out of 10 landlords (43%) said they would like a better tax environment to help expand their property business, with 45% calling for the expansion of available mortgage finance

One in 10 landlords said that they have used online social media to market their property or to operate other aspects of their property business. Facebook is the most popular online resource utilised by landlords, with 32% of the one in 10 saying they had used the site, whilst 21% had visited an online forum to discuss their property business

Nigel Terrington adds: ‘It is clear that confidence is high amongst the landlord community, which is reflected in the greater appetite for investment. There is obviously a dislocation between landlords' intention to purchase and their actual ability to do so given the continued scarcity of buy-to-let mortgage finance. However, PRS Trends confirms that landlords still value residential property as an investment vehicle.'