Tenant Demand Hits Record High

As the ongoing lack of rental supply continues to drive up rents across England and Wales, a recent report from Paragon Bank reveals tenant demand has now hit an all-time high. What’s prompting landlords to increase their rents, and which regions show the strongest rental demand?

A recent report from Paragon Bank reveals the current landlord outlook on tenant demand. According to the results from the survey of nearly 700 landlords, 67% have experienced increased tenant demand in Q1 of this year. This is a new all-time high for the metric, and up from 65% in Q4 2022.

Landlords were also asked to gauge tenant demand levels over the last quarter. The results show that 44% had noted a significant increase, which is up from 39% in Q4 2022, and is the highest since the BVA BDRC began tracking the metric in 2011. A further 23% responded that they’d seen a slight increase in tenant demand, 15% had not noticed a change, and as little as 4% saw a decrease.

How does this impact rising rents?

Landlords were asked as part of the survey to discuss rising rents. 85% of those asked had seen rents rising in the areas where they let out property, and 52% were planning to increase their own rents across their portfolios in the coming six months. The survey also found that, of those planning to increase rents, the average proposed increase was 8.2%.

Why are landlords increasing rents?

The survey also asked those planning to increase rents what was driving them to do so. The majority (73%) answered that covering the increased running costs of their properties was the most significant contributing factor. Aligning with local market rates (60%) and increased mortgage repayments (49%) followed closely behind.

How does tenant demand look on a regional basis?

While tenant demand has clearly increased across all areas of England and Wales, there are some specific regional hotspots for landlords to be aware of.

The highest levels of increased tenant demand were experienced by landlords in the East of England, with 90% noting an increase. In contrast, landlords in the West Midlands saw the lowest increase, albeit still at 73%.

When looking at current levels of demand, 94% of landlords in the Southwest said they were experiencing very strong or strong demand for their properties. Furthermore, 92% of Landlords in Wales, 92% in the West Midlands and 91% in the Southeast all said demand was currently at positive levels.

What does this mean for the Private Rental Sector?

Whilst increases in rental prices are a positive for landlords and encourage investment back into the sector, there are some concerns over what this could mean for the future of the buy to let market.

The Managing Director for Mortgages at Paragon Bank, Richard Rowntree, commented that: “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 a 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.”

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24th May 2023