Buy-to-let landlords expect high credit crunch demand

Buy-to-let landlords expect tenant demand to remain strong in coming months.

Fifty-four per cent of buy-to-let landlords polled by Paragon Mortgages said demand would rise in the coming year as void periods fall to their lowest level since 2005.

The growth in demand for rented properties comes as house prices are falling – making buyers unwilling to make a purchase – and the credit crunch means finding a mortgage a tight job.

John Heron, Paragon Mortgages managing director, said: "We have consistently said buy-to-let has strong counter-cyclical qualities and we are now seeing concrete evidence of this.

"Potential home buyers are postponing purchasing decisions because they either feel uneasy about the current market or they simply can't get a mortgage, so they are renting."

Demand is also strong from students, immigrants and people that choose to rent as a lifestyle choice.

"This is putting an increased strain on the private rented sector's stock," Mr Heron said.

"It is likely we will see void periods continue to fall over the coming months and yields continuing to rise as demand for rented accommodation grows."

The average void period per year is at its lowest level since the first quarter of 2005 at 2.7 weeks and has been falling since the second quarter of last year.

Meanwhile, Paragon's monthly Buy-to-Let Index shows that yields in May hit their highest level since February 2006.

John Heron concluded: "The private rented sector is playing an important role in filling the UK's housing gap in the current market. With fewer properties being constructed as developers cut back, demand for rented property is likely to be strong for the foreseeable future."