Strong tenant demand pushes rents

On the back of a slowing housing market, the research has shown that higher borrowing costs and the uncertain outlook for house prices have been the catalyst within the private rented sector.

However Paragon have said that this increased level of demand is creating an upward pressure on rents.

In this positive environment, investors expect to grow the size of their portfolios over the next year by 5%, from 11.5 to 12.1 properties, according to Paragon’s latest survey of landlords. In value terms, they expect the average portfolio to be worth £1.5 million in 12 months’ time.

In addition, RICS have found that rents are growing at record levels, with surveyors expecting particularly strong tenant demand into the autumn as first-time buyers delay property purchase. Nearly a third more chartered surveyors reported a rise in tenant lettings with 20% more landlord instructions compared with 8% in the previous quarter.

This view is confirmed by ARLA, whose quarterly survey of letting agents today reveals that tenant demand outstrips supply in all areas of the rental market, with a knock-on effect on achievable rent levels, which have risen in all parts of the country. Paragon’s latest Buy-to-Let Index shows average rents rising at an annualised rate of 12.7%, to reach £10,914.

Nigel Terrington, chief executive of Paragon, said: “There is broad agreement that buy-to-let is a beneficiary of a softer housing market, as would-be homebuyers defer house purchase and find themselves competing with migrants, students and first jobbers, among others, for a finite supply of rented homes. The private rented sector continues to expand steadily to meet this growth in demand for accommodation and landlords add to their portfolios in the knowledge that tenant demand is buoyant and rents continue to rise.”