According to a report from Shawbrook Bank, houses prices in March this year increased by 9.9 per cent year-on-year and the average buy to let (BTL) property rose 5.6 per cent to £258,900.
However, the actual housing stock in the PRS has contracted over the last year by 2.6 per cent, now accounting for 17 per cent of all households in England, Scotland and Wales.
This is because some landlords chose to leave the market and some tenants returned to family homes, left cities or became homeowners.
Despite this, Shawbrook Bank said the outlook for the sector was one of growth, with demand from tenants rising as well as landlords and brokers expecting further expansion.
Renters are now predicted to rent for longer, with just under half of the 1,000 renters surveyed saying they expected to do so for the rest of their life. They pointed to affordability, increasingly flexible lifestyles, reduced responsibility of renting and the ability to live in a better location as drivers for this decision.
Some 1,000 landlords were also surveyed, and 42 per cent said they had seen demand increase over the past 12 months. Of these, 150 portfolio landlords were surveyed and they reported higher expectations for increases in demand.
Two thirds of landlords said they were confident the future of the property market over the next year and around a third said they were planning on buying a property in that time.
Reasons cited for increased confidence included house price growth, heightened demand from tenants, strength of the economy and increased rental yields.
Mortgage brokers also felt positive with 71 per cent saying it was more likely for property investors to grow their portfolio in 2021, and 12 per cent saying they expected the end of the stamp duty holiday to have no impact on the market.
Around a quarter of brokers said the BTL market would see the strongest growth in the second half of 2021.
John Eastgate, Shawbrook Bank’s managing director of property finance, said: “Against the backdrop of the pandemic, the PRS has once again shown its strength and the important role it plays.
“Landlords are looking to expand their portfolios due to a combination of rising house prices, attractive yields and growing demand from tenants. Borrowing to help fund this expansion is an attractive option, with landlords presented with great choice and historically low mortgage costs.”
Changing buyer demand
To adapt to changing tenant demand landlords are looking to buy in different areas, purchase different types of property and have changed the property attributes they look for.
The top priorities for landlords now are buying a property with a garden, followed by a decent sized living space, the property being located in a residential area, off-street parking and the proximity to green spaces.
Around one in 10 landlords said they planned to make their next purchase in a different location to their other properties and a third said they planned to buy in a more rural location.
According to the report, the highest rental yields can be found in the North West of England at 5.5 per cent, followed by Yorkshire and the Humber with 5.4 per cent and Scotland with 5.8 per cent.
Rental yield in London is currently pegged at 3.9 per cent, which is below the UK average of 4.3 per cent.
A tenth of landlords said they planned to buy a different type of property, with many now favouring semi-detached properties.
More landlords have made refurbishments over the last year, with six in 10 making changes to one of their properties over the last 12 months. Close to half of brokers have also observed heightened demand from clients looking to fund home refurbishment projects.
This included renovations such as repainting, adding new carpets and flooring, as well as bringing in a new kitchen or bathroom.