Buy to Let Investors Report Tenant Demand Booming

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More buy to let property investors have reported tenant demand booming than at any time in the past year, according to the latest PRS Trends Report for Q3 2019 from Paragon.

The proportion of landlords saying tenant demand is growing or booming has hit 29 per cent and reverses a substantial drop in Q1 2019 (21per cent) and returns the indicator to the same level it’s roughly maintained since Q2 2017 (average 30 per cent).

It also marks the first time that the proportion of landlords saying tenant demand is growing or booming has increased in consecutive quarters since Q4 2017.

Elsewhere in the report, portfolio landlords continue to drive an increase in portfolio size and value, with the overall average portfolio now at 13.2 properties and worth £1.82 million – the second consecutive, record average value.

However, despite tenant demand booming, the report reveals landlords continuing to take a cautious approach to their investments, with average gearing remaining historically low at 33 per cent loan-to-value and mortgage payments as a proportion of rent unchanged in Q3 2019 at 25 per cent.

Despite more encouraging signs in portfolio size and value in Q3 2019, landlord optimism remains historically low and now sits at 11 per cent, down from 13 per cent in the previous quarter. This extends what is now a long-term downward trend in optimism since the record high of 41 per cent, recorded in Q1 2014, shortly before the government announced its plans to change the way landlords are taxed, increased stamp duty on second homes, and held the EU Referendum.

Director of Mortgages at Paragon, John Heron, said: ‘A clearer picture is starting to emerge of the impact that multiple government and regulatory interventions are having on the PRS. In broad terms, landlords have been buying fewer properties and selling more at a time when there has been a resurgence in tenant demand.’

He continued: ‘RICS reported a similar trend in their August residential survey and it is widely anticipated that this will lead to reduced choice and higher rents for tenants. This is probably not the outcome that policy makers were looking for.’

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