According to a survey by Paragon Bank, almost 70% of landlords experienced an increase in tenant demand during the first quarter of the year. This is a new record high, surpassing the previous record of 65% in the final quarter of 2022. The survey involved nearly 700 landlords who were asked to assess tenant demand in the previous three months, and 44% of respondents noted significant increases. This is up from 39% in the final quarter of last year and is also the highest proportion since the research agency BVA BDRC began tracking this metric in 2011.
Only 4% of landlords surveyed reported a decrease in demand, while 23% indicated a slight increase, and 15% saw no change. In response to the rising demand, 85% of landlords said rents were currently increasing in the areas where they let property, with more than half planning to raise rents across their portfolio in the next six months. On average, those who plan to increase rents expect to do so by 8.2%.
The most common reason given by landlords for raising rents was to cover the increased cost of running a property (73%), followed by aligning with local market rates (60%) and increased mortgage finance costs (nearly 50%). While increasing demand was reported by landlords throughout England and Wales, there was some regional variation. The highest levels were experienced by landlords operating in the East of England, with 90% recording an increase, while the lowest was seen by 73% of landlords in the West Midlands.
When asked about current levels of tenant demand, 94% of landlords in the South West reported experiencing strong or very strong demand for their properties. Over 90% of landlords in Wales, the West Midlands, and the South East said demand was currently positive. Richard Rowntree, Managing Director for Mortgages at Paragon Bank, commented on the findings, stating that there is a need for more private rented sector homes. He emphasized that policies should strike the right balance between driving up standards and providing tenants with protection while not acting as a barrier to investment. Failure to address this could increase rental inflation and make affordable housing even more crucial.