A recent study conducted by Paragon Bank has unveiled a notable surge in tenant demand for rental properties in the final quarter of 2023. Six in 10 landlords participating in the research reported an uptick in demand for their properties during this period.
The research, commissioned by Paragon Bank and conducted by BVA BDRC, delved into the experiences of landlords across the country. Over a third of the surveyed landlords disclosed a substantial surge in tenant demand, with an additional quarter noting modest increases. Only 16% of landlords observed no change in demand, while a mere 4% reported a decline.
Regional analysis spotlighted the North West as the area experiencing the highest demand, with a staggering 75% of landlords witnessing an increase in tenant demand. Following closely were Yorkshire & The Humber, with 74%, and the East Midlands, where 71% of landlords reported heightened demand.
The survey also uncovered a correlation between increased tenant demand and rental inflation. In regions with the highest demand, landlords were more likely to report rent increases, with the East of England being the exception. The East Midlands led the pack, with 89% of landlords confirming rising rents, followed by the North West at 88% and Yorkshire & The Humber at 87%. Comparatively, regions like the South West (81%) and Outer London (79%) reported slightly lower percentages.
Looking ahead, the study revealed that 51% of landlords are planning to raise rents across their portfolios in the next six months. The primary driver behind these planned increases is the elevated cost of property maintenance, cited by 70% of landlords. Other factors include aligning with broader market rents (62%) and increased mortgage costs (40%), the latter experiencing an 8% decline compared to the previous quarter.
Richard Rowntree, Paragon Bank Managing Director of Mortgages, commented on the findings, stating, “Although tenant demand has moderated from its peak, a significant supply-demand imbalance persists across many parts of the country. The regions experiencing the most demand are also the most likely to witness rising rents, underscoring the need for a well-supplied Private Rented Sector (PRS) to maintain affordable rent levels for the millions residing in rental properties.”