Demand from tenants for rental properties continued to grow around the country in the third quarter (Q3) of the year, according to a survey of almost 2,000 landlords from Paragon Mortgages.
The study also found that rental yields – the annual rental income as a percentage of the property value – have remained steady throughout the year.
The research, conducted by BDRC Continental on behalf of Paragon Mortgages, found that the average national yield was 5.6% in Q3. Amongst Paragon customers, the figure was higher, at 5.9%.
The greatest proportion of landlords, 17%, reported yields of between 3%-4%, while one in ten investors have seen yields of 10% or more. Landlords in Yorkshire and the Humber reported the highest average yield, of 6.1%, with the lowest found in outer London, at 4.8%. However, outer London had the second largest rise in levels of tenant demand.
Regarding tenant demand, the East of England performed the best in Q3, with 52% of landlords reporting an increase in demand. In the North East, just 31% of investors saw a rise, while the national average is 41%.
This indicates strong annual growth in tenant demand across several regions since Q3 2014, with demand in the North East rising from 23% to 31% and in outer London from 42% to 48%.
Director of Mortgages at Paragon, John Heron, says: “This research shows that yields and tenant demand have remained strong throughout Q3, in common with 2015 overall. The figures reflect a steadily improving economic outlook for the UK as a whole and show that more and more people are actively choosing the flexibility of making a home in the private rented sector.
“Yields too have remained stable throughout 2015. Q3’s data shows London and the South East slowing down somewhat, while yields in the regions are growing. This represents a welcome rebalancing of the national economy, with some of the heat from London’s economy escaping the M25 and being distributed around the country.”1