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Eight in 10 landlords report stable and increasing demand for rental properties, survey shows

More than eight in 10 of landlords report demand for rental properties from tenants is either stable or increasing, Paragon Mortgages&#39 second quarter survey of UK landlords reveals.

Only 14% of landlords identified any deterioration in demand. Well over half describe tenant demand as stable, while over a quarter are experiencing growth in tenant demand. A small but significant minority of 3% described tenant demand as booming.

Paragon Mortgages&#39 managing director John Heron says: “Tenant demand, the key driver of buy-to-let, remains remarkably sound. The vast majority of landlords &#45 more than 80% – are finding that tenant demand is stable or on the up.

“Tenant demand is key to investors&#39 decisions as to whether to purchase new properties. They approach buy-to-let as a serious, long-term business and so long as they identify good levels of demand they will generally continue to grow their portfolios. On average, landlords expect to grow their portfolios over the next 12 months by 6% in terms of property numbers, and by 5% in terms of value.”

The average landlord in the survey currently owns 11.3 residential properties, worth £789,000, and expects to grow this to 12 properties, worth £829,000, over the next 12 months. This quarter, the value of the average portfolio is up 4.1% from the figure of £758,000 last quarter.

Landlords report that gross rental returns on their property portfolios are 7.3%. Having generally declined over the past two years, there is a modest increase in the yield being achieved this quarter from 7.1% to 7.3%. However, landlords remain cautious regarding the future and are working on the assumption that yields will ease a little more to 7.0%.

Most landlords operate in an independent fashion where the survey shows that only a relatively small proportion (21%) are members of a trade association. Those who do join such a body are twice as likely to join the National Landlords Association as any other.

Heron believes that membership of such organisations can be helpful and cost-effective for landlords. He says: “As a fairly disparate and independent-minded professional group, landlords don&#39t co-operate a great deal between each other. Trade organisations can help them speak in a more unified way, representing their interests in the industry and to government at all levels.

By joining and swelling the membership of trade bodies such as the NLA, landlords will give themselves a more powerful voice, and also benefit from various other valuable benefits which can more than justify the annual subscription. At Paragon Mortgages, we are now offering all our customers a limited form of membership of the NLA and hope that they will be encouraged to participate fully in the association.”

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