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Paragon reveals research

Amanda Jarvis

May 12, 2006

One quarter of landlords reported that tenant demand for residential property is currently increasing, with two thirds saying that it is stable. Buoyant tenant demand is having a knock-on effect on rents, with a substantial proportion of landlords (38.5 per cent) reporting that rents achievable have increased over the last six months. On top of this, the survey shows a decline in average annual void periods, from almost three weeks on the occasion of the last two quarterly surveys to 2.8 weeks now.

John Heron, managing director of Paragon Mortgages, said: “Landlords are experiencing strong tenant demand, as reliance on rented accommodation continues to grow due to social and demographic trends. More young people see renting as a lifestyle choice, and in addition, there are an increasing number of students and immigrants who tend to opt for rented homes to meet for their accommodation needs.

“These trends are clearly having an impact on landlords’ future investment plans. Landlords plan to grow the size of their portfolios from 10.8 to 11.4 over the next year. In value terms, landlords expect a higher level of growth in their portfolios than they have at any time for almost two years.” 

The current average portfolio size of landlords surveyed is £1.31 million. Landlords are predicting an overall increase of 5.6 per cent in the net value of their properties in the next 12 months.

The majority of landlords (72 per cent) currently achieve gross rental yields (based on market value of their residential property) of between four and seven per cent, with an average return of 6.3 per cent.  Respondents to the survey expected gross yields to rise to 6.4 per cent over the next 12 months.

This picture of the buy-to-let sector on the part of landlords comes despite some misgivings expressed over the new licensing of Houses in Multiple Occupation introduced on 6 April. Over a third of landlords said that this measure would make things more difficult.

John Heron concluded: “What comes over clearly is that landlord confidence is at a high level. With tenant demand remaining strong and future prospects rosy, they will take HMO licensing in their stride. They do need to make sure they familiarise themselves with the new rules, however, and make sure they are compliant before the end of the three month grace period.”


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