Tenant demand reported by landlords has reached an all-time, research conducted on behalf of Paragon Bank has found.
A survey of nearly 700 landlords found that 67% experienced increased tenant demand during the first quarter of the year, a new all-time high and up from 65% recorded during the final quarter of 2022, the previous record high.
As part of the survey, landlords were asked to gauge tenant demand during the previous three months. Significant increases were noted by 44% of respondents. This is up from 39% on the final quarter of last year and is also the highest proportion since research agency BVA BDRC began tracking the metric in 2011. A further 23% of landlords indicated that tenant demand had increased slightly, 15% had seen no change, while just 4% experienced a decrease.
In response to rising demand, rents have also increased – 85% of landlords said rents were currently rising in the areas where they let property, with over half (52%) planning to increase rents across their own portfolio in the next six months. Of those looking to increase rents, the average planned increase was 8.2%.
Covering the increased cost of running a property was the most common reason given by those planning to increase rents (73%), along with aligning with local market rates (60%). Increased mortgage finance costs was cited by 49% of those planning to raise rents.
Although increasing tenant demand has been reported by landlords throughout England and Wales during the first quarter, there was some regional variation. The highest levels were experienced by those operating in the East of England, with nine in 10 recording an increase, while the lowest was seen by the 73% of West Midlands-based landlords.
When asked about current levels of tenant demand, 94% of landlords in the South West said they were experiencing strong or very strong demand for their properties. Over 90% of landlords in Wales (92%), West Midlands (92%) and the South East (91%) said demand was currently at positive levels.
Richard Rowntree, Managing Director for Mortgages for Paragon Bank, comments: “The fact that we’ve seen another high in the proportion of landlords who have told us that they’ve experienced an increase in tenant demand reinforces what I’ve said previously; put simply, we need more private rented sector homes, not less. An important element of this is policy that strikes the right balance between driving up standards and providing tenants with protection while not acting as a barrier to investment.
“Failure to address this will further drive rental inflation and increase competition for rented homes at a time when affordable housing is as important as ever.”