Paragon shows continued stability in PRS

Paragon’s latest PRS trends report, based on data collected through Q3, also reveals that landlords expect conditions to remain stable over the medium term. On indicators of future confidence, such as expected yield growth and tenant demand over the coming 12 months, the forecast is for levels to remain the same, rather than expand or contract.

More than half of those landlords surveyed report steady tenant demand over the quarter, while 40% said tenant demand was either ‘growing’ or ‘booming’. The percentage of respondents expecting tenant demand to remain stable over the coming 12 months, or grow, has also increased from 85% to 89%.

The latest data also shows that average yields have grown over the last three months from 6.3% to 6.4%. This improvement is in line with steady growth seen throughout 2015. In another key indicator of confidence that the PRS market will remain stable, landlords indicated that they expect yields to remain stable and maintain current levels over the coming 12 months.

On the direct question of whether or not landlords intend to purchase properties over the coming 12 months, the figures again show a steady market and a slight increase in optimism. Those intending to buy are up from 16.8% to 18.4%.

Reflecting the overall stability of the market, however, landlords on average expect the number of PRS properties in their portfolio to be the same as they are currently in 12 months’ time.

Void periods remain historically low at just below 2.6 weeks. This could be a reflection of the changing demographics of those choosing to live in the PRS. The most recent data shows an increase in the numbers of families with children moving into the PRS, and a corresponding decrease in young couples without children and single professionals.

But despite the changing makeup of the tenant population, demand for longer-term rental agreements remains relatively low.

These demographic changes also appear to be reflected in the on-going buying intentions of landlords who are investing more in traditional family housing.

On the question of how landlords view their portfolios compared with three months ago, levels have remained stable throughout 2015 and continue to do so in the latest data. Those feeling a little more optimistic are up by 1.6% and a majority (58%) report that optimism levels are unchanged since the last quarter.

John Heron, Paragon’s director of mortgages, said: “So, in all, this quarter’s results present a picture of a PRS sector that is neither booming nor contracting but rather growing steadily.

“There is room for improvement and it will be interesting to see, in future reports, if macroeconomic concerns about the stock market and the Eurozone, and changes in tax and regulation such as those recently announced by the Chancellor, have an impact on sentiment.

“For the time being however, landlords are seeing steady growth and they expect to see this continue as demand for quality PRS accommodation remains buoyant.”