Landlords plan to purchase

The quarterly snapshot of the private rented sector and buy-to-let market shows that 12% of landlords are planning to purchase in the second quarter of 2010, compared to 10% who said they would buy in the first quarter of the year.

Of those planning to purchase, terraced housing is the preferred option, with just over two thirds of landlords (67%) intending to purchase this type of property, followed by semi-detached housing (25%).

Nigel Terrington, Paragon Group 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.”

The Q1 2010 PRS Trends Report, which covers the three months to March 31, also shows:

• Tenant demand remains strong, with 24% of landlords stating that demand grew during the quarter, compared to 8% who said it was declining.

• Looking forward, landlords expect tenant demand to strengthen considerably, with nearly four out of 10 landlords (36%) forecasting demand for their property to be higher in 12 months' time

• The average portfolio value increased for the second quarter in succession, rising by 6.1% during the period to £1.52 million.

• Landlords expect the average value of their portfolios to be 1.2% higher in twelve months' time

• Access to mortgage finance remains an issue. Of those who attempted to secure mortgage finance for purchase or remortgage purposes, 82% said it was more difficult compared to the previous quarter, with 7% stating that it was easier

• Yields were 6% during the period.

Nigel Terrington added: “Landlords are in a strong position. They are enjoying unprecedented levels of tenant demand, and structural changes taking place in the UK will create further demand. As the Royal Institution of Chartered Surveyors recently highlighted, this is leading to higher rental income.

“Whilst this is positive for existing landlords, it emphasises the vital need to expand PRS supply. Supply is being inhibited by a lack of available mortgage finance and there is a danger that households could eventually be priced out of the sector.”