Tenant demand hits two-year high

The quarterly snapshot of developments in the PRS and buy-to-let market showed the proportion of landlords reporting growing levels of tenant demand was at its highest level since the final quarter of 2008.

Four out of 10 landlords said tenant demand grew during the quarter, compared to 36% during the third quarter. The proportion of landlords reporting growing levels of tenant demand has now risen for six consecutive quarters, which has coincided with a shortage of mortgage finance in the owner-occupied mortgage sector.

Just 4% of landlords said tenant demand fell during the quarter, the lowest proportion since the third quarter of 2008 and the second lowest level since Paragon started collating the data in 2004.

Commenting, Nigel Terrington, Paragon Group chief executive, said: “Tenant demand shows no signs of slowing down and in some busy markets, such as London, there is anecdotal evidence of sealed bids being used for certain properties.

“This will become more commonplace across the UK unless the PRS is able to expand to meet higher levels of demand. Four out of 10 landlords say that tenant demand grew during the period, which is a significant number and has major implications for renting in the UK if the issue of rental property supply cannot be addressed.”

The Q4 2010 PRS Trends Report, which covers the three months to December 31, also shows:

 An improvement in the availability of buy-to-let mortgage finance – 19% of landlords said that mortgage finance was either widely or reasonably available, up from 17% during the third quarter. Conversely, the proportion of landlords stating that mortgage finance was very restricted dropped from 29% in the third quarter to 26% in the fourth

 Landlord confidence remained healthy during the period, with 17% of landlords saying they were more optimistic regarding the performance of their property portfolio

 Yields remained static during the period at 6.1%. Yields remained between 6% and 6.1% throughout the whole of 2010, offering landlords’ stability

 The average number of properties in a portfolio stood at 12 during the quarter, with the average weighted portfolio value standing at £1.51 million. The average gearing – the level of borrowing as a proportion of the property’s value – stood at 37%

 The average void period fell for the second quarter in a row to an average of 2.9 weeks a year

Nigel Terrington added: “The prospects for landlords are strong. Tenant demand continues to strengthen, yields are healthy and stable and confidence is high. The housing market is presenting some strong buying opportunities and landlords are well placed to take advantage.”