Under-supply of rental properties poses huge threat, warns Paragon

An under-supply of rental properties has serious implications, a specialist lender has warned.

Nigel Terrington, Paragon Group chief executive, suggested the UK could be running out of homes for rent in the face of demand. He said: “Tenant demand shows no signs of slowing down, and in some busy markets, such as London, there is anecdotal evidence of sealed bids being used for certain properties.

“This will become more commonplace across the UK unless the private rented sector is able to expand to meet higher levels of demand.”

He added that there are “major implications for renting in the UK if the issue of rental property supply cannot be addressed”.

He was speaking after Paragon’s Private Rented Sector Trends report for the last quarter of last year was published.

It showed that tenant demand hit a two-year high.

But landlords are still struggling to get mortgages, and although empty periods between tenancies are falling, yields have done no more than stay steady.

The quarterly snapshot of developments in the buy-to-let market showed that the proportion of landlords reporting growing levels of tenant demand was at its highest level since the final quarter of 2008.

Four out of ten landlords said tenant demand grew during the quarter, compared to 36% during the third quarter. The proportion of landlords reporting growing levels of tenant demand has now risen for six consecutive quarters.
 
Just 4% of landlords said tenant demand fell during the quarter, the lowest proportion since the third quarter of 2008 and the second lowest level since Paragon started collating the data in 2004.

Although buy-to-let finance improved, it remains an issue: 19% of landlords said that mortgage finance was either widely or reasonably available, up from 17% during the third quarter. Conversely, the proportion of landlords stating that mortgage finance was very restricted dropped from 29% in the third quarter to 26% in the fourth.

Yields remained static during the period at 6.1%. The average number of properties in a portfolio stood at 12 during the quarter, with the average weighted portfolio value standing at £1.51m. The average gearing – the level of borrowing as a proportion of the property’s value – stood at 37%.

The average void period fell for the second quarter in a row to an average of 2.9 weeks a year.