Growing number of families choosing to rent

Paragon’s latest buy-to-let index has reported that rents have risen nearly 14% over the last year to stand at £12,048 in April, having just broken the £1000 a month barrier in March. And according to separate research, Paragon has found the average age of tenants has reached 32.8, from 31.0 at the start of 2007.
John Heron, managing director of Paragon Mortgages, said: “We have known for some time that the tenure of the UK is changing as a growing and more diverse demographic are choosing private rented homes – the percentage of households living in private rented accommodation rose from 10% in 2002, to 12% in 2007. There is no doubt tenant demand is following an upward trend.

“But the recent lack of mortgage availability for potential first-time buyers, as well as a fall in confidence in the housing market has caused more people to stay in private rented homes for longer. If the situation does not improve for first-time buyers, we will soon arrive at levels of demand for private rented homes that we previously wouldn’t have expected to see for many years. The trend is definitely accelerating.

Heron said that with rents rising and investment property prices beginning to cool – by 0.5% over April – landlords’ yields look set to rise above their current level of 6.3% if tenant demand continues to grow: “With buying opportunities for landlords presenting themselves as house prices moderate, we expect to see further expansion of the private rented sector over the next couple of years.”