Uncertain housing market fuels rental demand

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Uncertainty about the UK housing market has increased demand for rental properties and driven up the returns for landlords, a new study has suggested.

Paragon's October Buy-to-Let Index showed that total returns for landlords rose to 14.2 per cent during the month, up from 12.9 per cent in March.

In particular, the survey showed that returns for properties in Greater London (25.1 per cent), East Anglia (24.5 per cent) and the north (20.6 per cent) remained especially strong.

What's more, Paragon's findings indicated that typical rents in the country have increased by 6.9 per cent in the last year.

The company's chief executive, Neil Terrington, said that he expects tighter lending criteria to further add to demand for rental property.

"In the current environment, lenders are reducing their risk by handpicking the best customers and there are reports that the number of rejected applications has risen by 60 per cent in the past six months," he explained.

"However, the growth of the buy-to-let market has given these people more options - before it was either live at home or buy a property, even if it meant you were financially stretched.

"Now, the private rented sector is offering good quality alternatives to house purchase, enabling people to live in a quality of home they may not necessarily be able to afford to buy."

A study by moneysupermarket recently suggested that first-time buyer numbers were dropping as it became harder for these people to get a mortgage.

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