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PRS Trends – Q3 2023

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An all-time high in tenant demand, alongside improvements across other key indicators of the state of the private rented sector, has helped landlord confidence, previously dented by economic instability, bounce back strongly in the third quarter of the year, our latest report reveals.

PRS Trends – Q3 2023, developed using insight gained from in-depth interviews of almost 800 landlords, highlights an increase in confidence for the prospects of different aspects of lettings - capital gains, rental yields, UK financial market, UK Private Rented Sector and own letting business – compared to the previous quarter and the same period in 2022.

This is likely to be influenced by improvements across a number of key metrics that offer insight into the current state of the private rented sector, including:

  • An all-time high of 71% of landlords report increasing levels of tenant demand, up from the previous record high of 67% recorded in Q2 2023
  • The proportion of landlords reporting tenants falling into rent arrears has fallen from 35% in Q2 2023 to 33% this quarter
  • The average number of tenants each landlord reported being in arrears fell from 1.7 last quarter to 1.3 tenants in Q3, with each owing approximately £1,900, down from £2,200 in Q2 2023

Download PRS Trends – Q3 2023

The report also revealed that alongside these encouraging findings, yields achieved by landlords stabilised, increasing from 5.2% in Q2 to 5.3% this quarter.

This may have contributed to the first improvement in landlord profitability so far this year after 80% reported making a profit from their lettings activity, a 3-percentage point increase since Q2.

Richard Rowntree, Paragon Bank Managing Director of Mortgages, said: “The latest edition of our PRS Trends report, covering the third quarter of the year, is really encouraging, revealing a number of positive findings.

“These have helped to boost optimism amongst landlords after understandably being impacted by the challenging conditions that all sectors have faced over the past couple of years.

“This is important because to meet the record high levels of tenant demand highlighted in the report, landlords need to feel confident enough to invest in privately rented homes, something I’d like to think we will see continue to increase as stability returns to economy.

“Despite this more positive outlook, we recognise that the fiscal and regulatory landscape still poses challenges for landlords who will need support from the sector to enable them to make prudent investments in good quality homes.”

“Our report, The rental sector energy challenge, is an example of how we’re examining the issue in a bid to learn more about the support we can provide landlords.”

Download PRS Trends – Q3 2023

Paragon Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England number 05390593. Registered office 51 Homer Road, Solihull, West Midlands B91 3QJ. Paragon Bank PLC is registered on the Financial Services Register under the firm reference number 604551