UK private rented sector “booming”

UK private rented sector “booming”

Increasing yields and record low voids are leading investors to have high confidence in the private rented sector heading into 2016.

Summary:

  • Consistent demand for PRS property sees void periods remain at a record low of 2.6 weeks
  • Investors are experiencing steady occupancy and a further 40% describe tenant demand as “booming”
  • 90% of investors surveyed believe that tenant demand will remain steady or increase during 2016

The private rented sector (PRS) in the UK has seen increased yields and void periods at historic lows.

A report by Paragon Mortgages showed that more than half of investors surveyed experienced steady demand over the last quarter, with a further 40% describing tenant demand as “booming” or “growing”.

With void periods remaining historically low at just below 2.6 weeks, experts believe this could be a reflection of the changing demographics of those choosing to live in the PRS. An increase in the numbers of families with children moving into the PRS, along with a steady stream of young couples without children and single professionals, keeps demand high.

Improvement in yields has been steady throughout 2015. Average yields have grown to 6.4% in the last quarter and nearly 90% of respondents expect tenant demand to remain steady or increase over the next 12 months, increasing from 85%.

John Heron, Managing Director of Paragon Mortgages, said: “This quarter’s results present a picture of a PRS sector that is neither booming nor contracting, but rather growing steadily. For the time being, landlords are seeing steady growth and they expect to see this continue as demand for quality PRS accommodation remains buoyant.”

Investors who intend to buy over the next 12 months has increased from 16.8% to almost a sixth, and optimism levels remain stable, with 58% reporting their confidence is unchanged, remaining high throughout 2015 and into 2016.

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