A record 71% of landlords reported an increase in tenant demand during the third quarter of 2023. This figure, identified in research for Paragon Bank, represents the highest level of demand observed in the 12-year history of tracking by research agency BVA BDRC, surpassing the previous record of 67% in the second quarter. Only 3% of landlords noted a decline in tenant demand.
The West Midlands emerged as the region with the most robust tenant demand, where 76% of landlords experienced a rise, followed closely by Wales (75%), the South East (74%), and the East Midlands (73%). The North East and the East of England reported the lowest increases, with 65% and 61% of landlords seeing a growth in demand, respectively.
This surge in demand is contributing to a noticeable increase in rents. A striking 87% of landlords in various areas acknowledged this trend, consistent with the previous quarter’s findings. Approximately 70% of landlords have raised rents across their portfolios in the past year, an increase from 65% in Q2. Furthermore, 54% of landlords plan to increase rents in the next six months, aiming for an average hike of 8.4%.
When asked about their reasons for rent hikes, 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. Nearly half (48%) indicated increased mortgage finance costs as a reason, although this figure marks a nine percentage point decrease from the previous quarter.
Richard Rowntree, Managing Director for Mortgages at Paragon Bank, commented on these findings: “During the first two quarters of the year we saw record levels of tenant demand reported by landlords. For this to be surpassed in Q3 highlights how the imbalance between the supply of rented homes and demand from renters is not improving. This reduces choice and increases competition for renters, while fuelling rental inflation, a scenario that often impacts the most vulnerable to the greatest degree.
“With social housing unable to meet this demand and home ownership aspirations hindered by cost-of-living pressures, further investment in the PRS cannot be delayed.”