Vast majority of landlords also seeing rental inflation in the areas where they operate
The proportion of landlords reporting increased levels of tenant demand during the third quarter of the year hit a new record high, according to specialist buy-to-let lender Paragon Bank.
A study, conducted by market researcher BVA BDRC on behalf of Paragon Bank, has revealed that over seven in 10, or 71%, of landlords reported rising levels of tenant demand, up from the previous record high of 67% recorded in the second quarter – marking a new all-time high across the 12-year period that the metric has been tracked.
Breaking down the numbers by region, Paragon found that the strongest levels of tenant demand can be observed in the West Midlands, with 76% of landlords in the region reporting an increase, followed by Wales (75%), the South East (74%), and East Midlands (73%).
The North East (65%) and the East of England (61%) saw the lowest proportion of landlords reporting tenant demand increases.
Aside from increased tenant demand, landlords are also reporting rising rents, with 87% saying this was a current trend in areas where they let properties.
Seven in 10 landlords stated that they have increased rents across their own portfolio within the last 12 months, up from 65% in Q2. A lower proportion, 54%, of landlords are planning to raise rents across their portfolios in the next six months, up by three percentage points since the previous quarter. Those planning to increase rents anticipate doing so by an average of 8.4%.
Two thirds, or 66%, of landlords cited covering the increased cost of running a property as the reason why they are planning to increase rent – the most mentioned reason despite falling from 74% in Q2.
This was followed by aligning with local market rents, which was the reason behind planned rent rises for 63% of landlords, up by four percentage points since the previous wave. Just under half, or 48%, of those intending to increase rents said that they will do so to cover increased mortgage finance costs, a nine-percentage point decrease on the last quarter.
“During the first two quarters of the year, we saw record levels of tenant demand reported by landlords,” said Richard Rowntree (pictured), managing director for mortgages at Paragon Bank. “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.”
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