Rents rise to a peak in February

Average rents rose to a peak of £11,886 in February from £11,604 in January, says Paragon’s latest Buy-to-Let Index.

Paragon says that as rental demand continues to grow in more difficult conditions for home purchase, landlords can achieve higher rents and yields on new and existing properties.

The index shows that rents have risen by 2.4% since last month and 5.2% over the past quarter, while yields stand at 6.3%, compared with 6% three and six months ago.

The private rented sector remains dominated by the large-scale investor, with 13% of landlords owning 100 properties or more, representing around three quarters of the private rented housing stock.

John Heron, director of mortgages at Paragon, says: “Large scale landlords dominate buy-to-let, and they have a very different view of the market from the short-term speculator – some of whom invested without a great deal of thought in new build properties, which they may now be having to sell into a more difficult market.”

He adds: “Serious landlords take a long-term perspective based on the underlying dynamics of supply and demand.”

Heron says they only invest in properties for which they know there is proven demand and which will generate an adequate return.

He adds: “There is no evidence that this class of investor is spooked either by the credit crunch or by the uncertain outlook for house prices.”