Over half of landlords in the UK expect tenant demand to increase in 2014 with four in 10 reporting growth in the last six months, a new survey shows.

Family properties in the UK getting smaller, research has found!

Over half of landlords in the UK expect tenant demand to increase in 2014 with four in 10 reporting growth in the last six months, a new survey shows.

Overall 58% of landlords predict tenant demand will grow in the next 12 months and nearly a fifth expect to expand their portfolios in 2014, the latest landlord sentiment survey from LSL Property Services found.

Also, three quarters of landlords believe now is a good time to buy or sell rental properties and prospects are bright for the rental sector in 2014 as rising prices are making property investment for buy to let an attractive investment opportunity.

In the past six months, 41% of the 2,195 landlords polled reported a rise in tenant demand, with just one in sixteen seeing a fall. Such growth in demand has been the driving force behind the series of rent rises seen during 2013. Just 10% of landlords are expecting demand to shrink.

Nearly a fifth, 18%, of landlords therefore anticipates growing their portfolio of properties over the coming 12 months, while 16% already expanded in 2013.

‘The rise in house prices is evidence of the underlying buoyancy in the property market and the stabilising of rent rises is an indication of the current healthy state of the rental sector,’ said David Newnes, director of LSL Property Services.

‘Landlords are therefore in a prime position to benefit from the strong yields on properties and aspiring buy to let investors can be encouraged by the climbing tenant demand, as not only does it signify the excellent long term investment opportunity, but also demonstrates the continued appetite for rental homes,’ he explained.

‘Demand for rented accommodation is strong, exemplified by the fact that the number of lettings, new viewings and applicants are all rising. There are strong foundations for prosperity in the rental sector, fuelled by increased economic optimism and future job creation. Against the backdrop of growing economic stability, more confidence is driving people forward in search of the attractive deals on offer across the buy to let mortgage market, which will allow them to benefit from the attractive returns,’ he added.

The survey also shows that of those who think now is a good time to buy, some 71% cited attractive property prices and half highlighted the better capital returns on offer compared to other forms of investment, while 47% pointed to strong tenant demand as a key investment driver.

However, despite the stark improvements in the mortgage market recently, just one in six landlords believe the availability of cheap finance is a key reason for why now is a good time to invest, although this is up from one landlord in 11 in December 2012. Indeed, 35% of landlords say that it is more difficult to raise mortgage finance compared to a year ago, highlighting that for some mortgage challenges remain a deeply embedded issue.

‘While the level of buy to let lending has been rejuvenated and is now climbing out of the doldrums, this is still short of historic levels. Securing mortgage finance is therefore not just a concern exclusive to first-time buyers, but remains a real and serious challenge for many landlords,’ said Newnes.

‘Lending to first time buyers and those without large deposits has itself seen a pick up but still has a long way to go, and the proportion of UK households is only increasing. It is the rental sector that will be continually needed to pick up the slack,’ he pointed out.

‘Filling the chasm between supply and demand is also reliant on the rising number of buy to let investors accessing the affordable mortgages required, thus allowing them to further widen the pool of rental accommodation on offer,’ he added.

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