Expected tenant demand to fuel buy to let investment

Private landlords look set to continue investing in the private rental sector with 41% of landlords expecting tenant demand to increase in 2013, research from Paragon Mortgages has revealed.

Over the next 12 months 15% of landlords surveyed said they expected to purchase a new buy to let property.

Landlords were also asked to determine what they considered to be the most important factors for their business over the coming year.

The majority (83%) said the most relevant factor was rental demand, 69% said rent levels and 46% said tenant arrears.

Other key facts from the survey include:

Landlords’ average portfolio size in Q4 was 12.7 properties - this is expected to increase to an average of 13.2 in the next 12 months

The average yield achieved by landlords was 6.5%

The average void period reported was 3.0 weeks per annum

Of those looking to invest 47% are expecting to purchase terraced houses and flats or maisonettes.

Almost a third (30%) of landlords are looking to buy semi-detached houses and 20% plan to purchase multi-unit blocks.

The least popular investment choices were HMOs (13%) and detached houses (10%).

John Heron, managing director of Paragon Mortgages, said: “2012 was a good, steady year for landlords. They continued to invest in their property portfolios, albeit at a slower pace than needed for the private rental sector to cope with increasing levels of tenant demand.

“The next 12 months will be very interesting for the private rental sector and the buy-to-let market, there will be continuing progress and we will hopefully see confidence levels increase even further.”

Peter Lawrence at Lawrence Rand said: “This is yet another positive report on the private rental market which we fully expect to remain strong throughout 2013 and show good returns for investors.”