The quarterly snapshot of the private rented sector and buy-to-let market shows that 49% of landlords recorded growing levels of tenant demand during the period, compared with just 5% who said it was falling.
The proportion of landlords reporting growing tenant demand was up from 40% during the final quarter of 2010.
The proportion of landlords reporting increasing levels of tenant demand has now risen for seven consecutive quarters. Looking forward, landlords expect tenant demand to continue strengthening with over half (52%) expecting demand to increase over the next 12 months, and only 6% forecasting a decline.
Nigel Terrington, Paragon Group chief executive, said: “Landlords are experiencing high levels of tenant demand, and this is expected to rise due to a number of factors, including social housing reforms, lifestyle choices, low numbers of first-time buyers and wider demographic changes.
“We are seeing evidence that strong tenant demand is feeding through to higher rents. A lack of available mortgage finance is restricting the sector’s ability to expand and needs to be addressed to create a healthy and vibrant buy-to-let market in the UK.”
Paragon’s report, which covers the three months to March 31, shows that buy-to-let mortgage finance availability remains low with 64% of landlords saying that availability was limited. However yields increased to 6.2%, the highest level since Q4 2009, and the average void period fell for third quarter in a row to 2.8 weeks a year.
Nigel Terrington added: “Landlords have experienced a positive start to the year. Tenant demand continues to strengthen, yields are rising and confidence is high. Prospects for landlords in the private rented sector are high and they can expect this to continue throughout, and beyond, 2011.”
