A record-breaking 71% of landlords have reported a surge in tenant demand during the third quarter of 2023. This data, uncovered in research conducted by Paragon Bank, signifies the highest level of demand recorded in the 12-year history of tracking by esteemed research agency BVA BDRC. This surpasses the previous record set in the second quarter, where 67% of landlords noted increased demand, with only a mere 3% experiencing a decline.
The region most notably impacted by this unprecedented rise in tenant demand is the West Midlands, where a remarkable 76% of landlords reported an increase. Following closely behind are Wales (75%), the South East (74%), and the East Midlands (73%). In contrast, the North East and the East of England reported the lowest increases, with 65% and 61% of landlords witnessing growth in demand, respectively.
This surge in demand is directly contributing to a noticeable uptick in rental prices. A striking 87% of landlords in various areas acknowledged this trend, aligning with the findings of the previous quarter. Notably, approximately 70% of landlords have increased rents across their portfolios in the past year, marking an increase from 65% in Q2. Looking ahead, 54% of landlords have plans to raise rents in the next six months, with an average anticipated hike of 8.4%.
When questioned about the rationale behind these rent increases, two-thirds (66%) of landlords cited the need to cover the rising costs of property maintenance, while 63% mentioned aligning with local market rents as a key factor. Additionally, nearly half (48%) indicated increased mortgage finance costs as a reason, although this figure represents a nine-percentage-point decrease from the previous quarter.
Richard Rowntree, Managing Director for Mortgages at Paragon Bank, offered insights into these findings, stating, “During the first two quarters of the year, we witnessed record levels of tenant demand reported by landlords. The surpassing of this record in Q3 highlights the persistent imbalance between the supply of rented homes and the escalating demand from renters. This reduction in choice and increased competition for renters is fuelling rental inflation, a scenario that often impacts the most vulnerable to the greatest degree.”
He continued, “With social housing unable to meet this demand and home ownership aspirations hindered by cost-of-living pressures, further investment in the Private Rented Sector (PRS) cannot be delayed.”