41% increase in UK tenant demand

41% increase in UK tenant demand

One in 10 investors report 10% yields as Britain’s private rented sector continues to enjoy sustained demand from a population in need of rented property.

Summary:

  • Demand for private rented sector property across the UK grew by 41% in Q3 2015
  • One in 10 investors reported 10% yields, with the highest yields found in Yorkshire cities such as York
  • Over 50% of 20 to 39-year-olds in the UK will be renting in the private rented sector by 2025 – meaning the time to invest is now

Is this the reason UK private rented sector (PRS) property is currently one of the country’s must-have assets?

41% of PRS investors reported an increase in tenant demand in the third quarter of 2015, a new survey conducted by BDRC Continental on behalf of Paragon Mortgages has found.

Average UK yields currently stand at 5.6%, but one in 10 investors said that they’re currently enjoying yields as high as 10% such is the frenzied demand for rental accommodation among tenants.

The highest average yields in the country, 6.1%, were reported in the Yorkshire and Humber region, driven by key cities such as York and Sheffield, while the lowest, 4.8%, were recorded in outer London.

Commenting on the findings John Heron, Director of Mortgages at Paragon, said: “The figures reflect a steadily improving economic outlook for the UK as a whole and show that, more and more people are actively choosing the flexibility of making a home in the private rented sector.”

Traditionally a nation of homeowners, changing attitudes towards homeownership is one of a number of factors that’s accelerating the growth of the PRS.

By 2025 it’s estimated that over half of Britain’s 20 to 39-year-olds will be renting property in the sector ─ and this is driving significant levels of institutional investment in key cities. In Manchester for example, a city with 60% more 25 to 29-year-olds than anywhere else in the UK, 10,000 PRS units are planned for construction in the coming years, driven by investment from pension funds, insurance companies and private businesses.

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