Paragon Mortgages’ latest Private Rented Sector (PRS) trends report for the third quarter of the year reveals that average yields have grown over the last three months from 6.3% to 6.4%.
The lender said this growth is in line with steady growth observed throughout 2015. When asked about expected growth over the next 12 months, landlords expressed confidence that yields will remain stable and maintain current levels.
On the supply side, void periods, the average period of time PRS properties spend unoccupied per annum, remain at historically low levels of just below 2.6 weeks. In conjunction with this, tenant demand is also healthy with more than half of landlords describing demand as ‘stable’ and more than 40% saying that demand is either ‘growing’ or ‘booming’.
Paragon said the prospects for expected demand are also positive, with more than half of landlords expecting demand to increase over the next 12 months, compared to 42% who expect it to remain stable.
The survey also shows an increase in young families with children moving into the PRS, and a corresponding decrease in young couples and professionals. Despite this, demand for longer-term rental agreements remains relatively low.
John Heron (pictured), Paragon’s director of mortgages, said: “Our latest PRS Trends Survey data is indicative of a market growing steadily and sustainably over the long-term. With low void periods and steady tenant demand, which is expected to continue growing, yields remain on a gradual upward trend and landlords are confident they will continue to do so.
“The data also reveals the changing demographic of those choosing to live in the PRS. This is reflected in the buying intentions of landlords which seem to be shifting slightly away from investing in multi-occupancy blocks, towards terraced housing – often more suited to young families.”