More landlords are selling than buying, threatening to widen the gap between rental supply and need
Tenant demand across the UK has risen for the first time in two years, according to new research from Pegasus Insight, though concerns remain about the availability of rental homes.
The market research firm's Q2 2026 Landlord Trends report found that 63% of landlords describe tenant demand in their areas as either very strong or quite strong, up from 58% in the first quarter. The increase marks the first quarterly rise since Q1 2024, ending a period of sustained decline.
The improvement was driven primarily by a rise in landlords recording the strongest demand levels. Some 29% now describe demand as very strong, up seven percentage points from the previous quarter, while 34% report quite strong demand. The proportion describing demand as average fell from 29% to 23%, with just 5% reporting weak demand.
The longer-term picture illustrates the scale of the recent fall. Landlords reporting strong demand stood at 83% in Q1 2024, declining steadily to 77% by Q4 that year and continuing to fall through 2025, reaching 58% in Q1 2026 before the latest recovery.
The rebound in demand coincides with continued pressure on rental supply. Pegasus Insight's research has consistently shown landlords to be more likely to sell properties than purchase them, raising questions about whether the stock of homes in the private rented sector (PRS) can meet rising demand.
"Tenant demand has been gradually normalising from the exceptional levels recorded in 2024, so a five percentage point rise this quarter suggests that the need for rental accommodation remains considerable," said Mark Long (pictured right), founder and director at Pegasus Insight. "It is particularly notable that the increase is being driven by landlords reporting very strong demand.
"Almost three in 10 now fall into this category, while just 5% describe demand as weak. These figures are an important reminder that millions of households rely on the PRS for their homes and that sufficient rental supply is essential to meeting that need."
Long warned that demand was strengthening at a time when landlord appetite for investment remained weak, with more landlords looking to sell than buy. He said any measures that discouraged landlords to invest or prompted them to reduce their portfolios risked widening the imbalance between supply and demand, with tenants ultimately facing reduced choice and higher rents if rental stock continued to contract.
On policy, Long said the constrained state of housing supply meant government needed to acknowledge the role private landlords played in providing homes. "The priority should be encouraging investment and retaining existing rental stock, and the new government should be wary of introducing further barriers that risk reducing supply," he added.
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