Tenant demand continues to grow in Q3, while yields remain stable

A survey of nearly 2,000 landlords commissioned by Paragon Mortgages reveals that tenant demand has continued to grow across the country in Q3. 

The data also shows that rental yields – annual rental income as a percentage of property value – have remained at the same levels seen throughout 2015.

The survey, undertaken by BDRC Continental on behalf of Paragon Mortgages, found that yields averaged 5.6% nationally in Q3. Amongst Paragon customers this figure was higher, with a national average of 5.9%.

The greatest number of landlords (17%) reported yields between 3% and 4%, while one in 10 landlords reported yields of 10% or more. Yorkshire and the Humber reported the highest yields in Q3 (6.1%) with outer London reporting the lowest (4.8%), despite outer London having the second largest increase in levels of tenant demand.

On tenant demand, the East of England region has performed best in Q3, with 52% of landlords reporting an increase in demand. This figure was just 31% for the North East – with a national average of 41% of landlords saying demand had increased.

This figure represents a strong year-on-year increase in tenant demand across several regions since Q3 2014 with the demand in the North East having increased from 23% to 31% and in outer London from 42% to 48%.

John Heron, director of mortgages at Paragon, said: “This research shows that yields, and tenant demand have remained strong throughout Q3, in common with 2015 overall. The figures reflect a steadily improving economic outlook for the UK as a whole and show that, more and more people are actively choosing the flexibility of making a home in the private rented sector.

“Yields too have remained stable throughout 2015. Q3’s data shows London and the South East slowing down somewhat, while yields in the regions are growing. This represents a welcome rebalancing of the national economy, with some of the heat from London’s economy escaping the M25 and being distributed around the country.”

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