Buy to Let Landlords Show Demand Increases on Rental Properties and Lending Availability is Still Too Restricted
A research study by Paragon Group that polled 200 landlords’ data showed that four out of ten landlords felt demand had increased for a rental property in the last quarter of 2020. This is an increase of 36 per cent from the third quarter of last year. This increase in demand reporting has occurred for six consecutive quarters.
The study by the Paragon Group also showed that only 4 per cent of landlords said they had seen a reduction in demand. This was the lowest level reported since the third quarter of 2018 and the second-lowest since data has been being compiled starting in 2019.
Landlords also reported that the time between tenants has been closing in due to the increase in demand. The average reported time has dropped to an average of 2.9 weeks. This is expected to fall even shorter as demand further outnumbers supply. For even those seeking a buy to let mortgaging have found lending tightened.
Nigel Terrington, the Paragon Group’s Chief Executive, 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.
“Four out of 10 landlords say that tenant demand grew during the period, which is a significant number and has major implications for renting in the UK if the issue of rental property supply cannot be addressed.”
The demand for rental properties has led many lenders to bring products focused on landlords to market. By bringing these focused products to landlords it will enable them to better obtain lending to meet demand. The landlords responding to the research by Paragon revealed that there has been a slight improvement in obtaining mortgage financing in the final quarter of 2020. Of those polled 19 per cent of the landlords say lending was either “widely available” or “reasonably available”. This response shows an increase of 17 per cent over the third quarter. Despite the increase, 26 per cent responded that lending was still very restricted showing that there is indeed a need for lenders to bring creative products to market geared toward the buy to let market.
Mr Terrington said: “The CLG’s figures highlight the growing number of people relying on the private rented sector (PRS) to provide their housing needs. The sector’s importance to UK housing continues to grow as increasing numbers of people opt to rent privately rather than step on the housing ladder.
“Demand for privately rented property is at an unprecedented level and far outweighs supply.
“With Capital Economics estimating that the private rented sector will be home to nearly one in five households by 2015, it is crucial that adequate levels of buy-to-let mortgage finance are available to enable landlords to expand the number of properties in the PRS.”