Stable Third Quarter For Buy-To-Let Landlords

Out of the landlords surveyed in the latest Paragon Mortgages Private Rented Sector (PRS) Trends research, 91% reported that they thought tenant demand was either stable or growing in the third quarter. Only 6% felt that tenant demand was in decline.

Landlords were able to achieve stable and healthy yields in Q3, with a reported average of 6.2%. As expected, professional landlords with more properties outperformed smaller-scale landlords, achieving average yields of 6.6% and 5.2% respectively. Landlords expect neither growth nor decline in 12 months’ time, forecasting an average of 6.2%.

Landlords were found to have an average property portfolio of 12.5 properties in Q3, with the expectation that this will increase to 12.9 in 12 months’ time. 16% of landlords reported intending to purchase further rental property in the final quarter of the year. 21% of those planning to invest are looking to buy detached properties, 30% are looking to buy semi-detached properties, but over half (58%) are expecting to invest in flats/maisonettes or terraced houses.

Over two-thirds (68%) of landlords questioned reported that their rental income had remained the same during Q3. Only 5% said they had experienced a decrease, while 27% reported an increase.

Void periods have seen a slight, though not perturbing, increase, with the average void period (per year) going up to 2.8 weeks from 2.7 in Q2. The average yearly void period has not exceeded three-weeks since mid-2010. Smaller-scale landlords have shown a tendency to fair better than professional landlords in terms of void periods, with 53% reporting that their average void period was less than two weeks, whereas this was true for only 39% of professionals.

John Heron, Managing Director of Paragon Mortgages, said, “It has been a stable quarter for landlords. Yields have remained healthy and at a consistent level for the past 12 months.

“It is not surprising that landlords are continuing to see high levels of tenant demand and I suspect this will continue into Q4 and the coming year. The PRS is under increasing strain with the growing shortage of homes in the UK, housing policy needs to focus more on motivating private landlords to grow their portfolios to better meet demand.

“The PRS has made headlines this quarter following the review by Adrian Montague. We agree with the government’s position that the PRS is an increasingly important tenure providing housing to a growing number of people across the country. Now as the new housing minister takes the helm it will be interesting to see how he progresses with the recommendations made in the review.

“As we approach the final quarter of the year it will be interesting to see how the sector progresses and also to hear landlords views and predictions for 2013.”

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