Tenant demand for private rented accommodation is continuing to rise according to a market report from specialist lender Paragon Mortgages. 

While a year ago Paragon reported that a quarter of landlords were expecting to sell at least some of their portfolios because of the stamp duty surcharge and imminent change to mortgage interest tax relief, that figure is now reversing, down to 17 per cent. 

And the proportion of landlords willing to purchase buy to let property has now risen to 13 per cent, up from a record low of nine per cent 12 months ago.

Of the 204 landlords interviewed, 94 per cent described tenant demand as stable or growing, with fewer than one in 30 suggesting a decline. 

Tenant demand continues to impact average void periods, which remain unchanged at 2.7 weeks, with 48 per cent of respondents reporting that their properties stand empty for less than two weeks. 

Average yields also remained stable at 6.1 per cent.

Of landlords expecting to purchase, these are most likely to buy terraced houses (62 per cent), flats/maisonettes (31 per cent) or semi-detached houses (23 per cent). Notably, the proportion most likely to buy flats/maisonettes has decreased from 67 per cent in the previous quarter.

“With no material improvement in the supply of new housing against a background of strong population growth and household formation, it is no surprise that landlords are continuing to experience strong rental demand. It is promising therefore that there has been some improvement in landlord buying intentions albeit from a low base” explains 

John Heron, Paragon’s managing director.

But he cautions: “Any boost this gives to improving supply to the sector, however, needs to be balanced against the additional upward pressure that we are likely to see in rents as a result of the phased impact of the changes to the taxation of rental income.”