Tenant demand for UK Property Increases Significantly in the Final Quarter of 2023

In the final quarter of 2023, research conducted by Paragon Bank revealed that 60% of landlords experienced an upswing in tenant demand for their properties, signaling positive trends in the UK rental market.

The study, carried out by BVA BDRC on behalf of Paragon Bank, disclosed that over a third of landlords noted a significant surge in demand from tenants during the three months ending in December. An additional quarter of landlords reported slight increases, showcasing a robust demand landscape.

Regionally, the North West emerged as a hotspot, with 75% of landlords witnessing heightened tenant demand. Similarly, Yorkshire & The Humber and the East Midlands recorded substantial increases, reported by 74% and 71% of landlords, respectively.

The research also drew connections between increased tenant demand and rental inflation. Regions with the highest demand, such as the East Midlands (89%), North West (88%), and Yorkshire & The Humber (87%), were more likely to witness rising rents. This trend was notable, except in the East of England, where approximately 81% of landlords reported current rent increases.

Looking ahead, 51% of landlords expressed plans to raise rents in their portfolios over the next six months. The primary driver behind this decision was the increased cost of property maintenance, cited by 70% of landlords. Other factors influencing planned rent hikes included aligning with broader market rents (62%) and increased mortgage costs (40%), though the latter experienced an eight-percentage-point decline compared to the previous quarter.

Richard Rowntree, Paragon Bank Managing Director of Mortgages, commented on the findings, stating, "Although tenant demand has eased from its record highs, a persistent supply-demand imbalance persists across significant parts of the country. The dynamics of supply and demand indicate that goods and services in high demand and short supply command higher prices. Consequently, regions experiencing heightened demand are more likely to witness rising rents. This underscores the importance of a healthy and adequately supplied Private Rented Sector (PRS) to maintain affordable rent levels for the millions residing in rented homes."

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