Rental demand keeps growing

The private buy-to-let sector is continuing to perform well with more single-person households, higher numbers of students and increased immigration pushing up demand for rental property, new figures reveal.

The private buy-to-let sector is continuing to perform well with more single-person households, higher numbers of students and increased immigration pushing up demand for rental property, new figures reveal.

Rising investment property value and stable or increasing rents have seen landlords gain higher returns on their initial investment, up from 11.89pc in January to an average of 16.51pc in June, according to Paragon Mortgages' latest buy-to-let index.

Buy-to-let homes around the UK produced an average rental yield of 6.04pc in June, up slightly on 6.03pc from the year before.

Landlords with property in regions with lower house prices saw the highest rental yields, with the South West top of the pile. It enjoyed a rental yield of 6.48pc with the average property costing £173,497.


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Rental yields in Wales were also high at 6.47pc with house prices averaging £136,040.

But, at the other end of the scale, the pricier region of the South East pulled in a yield of 5.83pc with the average home costing £188,801, while Greater London produced a rental yield of 5.76pc on average property prices of £338,934.

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The average rent has increased by £351 - or 3.48pc - during the last three months with the typical gross annual rental income standing at £10,433 in June, up £240 from May.

Buy-to-let house prices also rose by 2.27pc in June and 7.29pc over the quarter to reach £172,772.

Paragon said that the demand for housing will continue to rise with the UK population currently growing by 0.3pc each year, largely due to immigration.

The Department for Communities and Local Government forecasts that 209,000 households need to be created each year, with immigrants accounting for perhaps a third of new households and the majority of the rental market.

Only 20pc of migrants become homeowners within three years of moving to the UK.

John Heron, Paragon Mortgages' managing director, said: "Trends in buy-to-let are undoubtedly very positive at the present time.

“We are seeing robust activity both from major landlords and also from the retail investor, who will often purchase to augment their long-term investment portfolio or to supplement their pension.

"Long-term trends in terms of household formation and inward migration point to a steady growth in the role of the private rented sector in meeting people's housing needs and investors are responding to this by increasing their involvement proactively."

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