Boost for the UK’s Buy To Let Property Market as high demand for tenants pushes up demand and rents

UK buy-to-let market experiences soaring tenant demand

Amidst the challenges faced by many individuals, including landlords, there is a glimmer of positive news in the UK buy-to-let sector, as properties continue to be eagerly sought after by tenants.

According to Richard Rowntree, managing director for mortgages at Paragon Bank, the buy-to-let market requires more homes to meet the growing demand from tenants across the country. This revelation comes in the wake of Paragon Bank's recent landlord survey, which reported the highest-ever level of increased tenant demand during the first quarter of this year, with a staggering 67% of respondents experiencing a surge in interest. This figure represents an increase from the 65% recorded in the previous year, emphasizing the ongoing high demand for rental properties.

Almost half of the surveyed landlords, 44% to be exact, described the rise in tenant interest as "significant," underscoring the strong appeal of the UK buy-to-let market. This figure also represents the highest recorded response from landlords since data collection began in 2011, as documented by BVA BDRC.

Rising rental prices reflect increasing demand

When tenant demand surpasses the available supply, it's expected that intensified competition will drive up prices, and that has been the case for several months now, with rental costs reaching record highs in many parts of the UK.

Of the surveyed landlords, 85% reported rising rents in the areas where their properties are located. More than half of them (52%) indicated their intention to increase rents across their portfolios in the next six months, with an average rent hike of 8.2%.

While increased demand plays a role in rising rental prices, other factors are also at play. Landlords are facing a more challenging operating environment, with higher mortgage costs and increased expenses for repairs and maintenance. Consequently, many landlords are passing on these higher costs to tenants.

The survey revealed that 73% of landlords were increasing rents to cover the rising operating costs of their properties. Additionally, 60% adjusted rents to align with local market rates, and 49% implemented rent hikes to offset increasing mortgage borrowing costs.

Demand variations across regions

Paragon's survey provides insight into demand levels across different regions of the UK buy-to-let market. However, it's important to note that demand can vary significantly within these regions, influenced by factors such as property type and location. For instance, demand may be higher in cities compared to outlying areas.

The survey found that in the east of England, around 90% of landlords experienced increased tenant demand. In contrast, only 73% of West Midlands landlords reported high levels of increased demand.

In regions such as the south west, Wales, the West Midlands, and the south east, 91-94% of respondents described the demand for their properties as strong or very strong.

Intensified competition presents challenges

While the current high demand for UK buy-to-let properties can benefit landlords by making it easier to fill their homes, it also creates a challenging landscape for tenants.

Richard Rowntree, managing director for Mortgages at Paragon Bank, emphasized the need for more private rented sector homes, stating, "An important element of this is a policy that strikes the right balance between driving up standards and providing tenants with protection while not acting as a barrier to investment."

Addressing this issue will not only help alleviate rental inflation but also reduce competition for rented homes, especially at a time when affordable housing is of utmost importance.

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