Tenants demand extra strong

Buoyant demand for rented homes is placing a strain on the stock of private rented sector accommodation, creating upwards pressure on rents. A third of landlords reported that tenant demand is expanding rapidly (the highest figure for almost four years), while a further 58% said it is strong and stable, according to a recent Paragon landlord survey.

With the Association of Residential Letting Agents predicting that tenant demand will continue to soar on the back of the credit crunch, this upward pressure on rents looks set to continue.

Yields have remained stable at 6.3% for the third consecutive month as annual rents rose from £11,886 in February to £12,041 in March.

John Heron, Paragon's director of mortgages, said: "The backdrop for buy-to-let remains positive across the country - potential residential purchasers are reluctant to buy in the current market or are unable to secure a mortgage and this is fuelling extra demand for rented accommodation.

"The professional end of the market remains committed to buy-to-let over the long term. They typically hold their investments for a decade or more, they are not intending to sell following the CGT changes and they are not experiencing pressure on their finances as a result of the credit crunch, as they borrow an average of less than 40% of the value of their portfolios.

"On top of that, they are enjoying steady growth in rents. The average rental property now generates in excess of £1,000 per month, and this upward trend looks set to continue in the future."