• A new record high of 71% of landlords report increased tenant demand during Q3 23
• The West Midlands identified as the region with the strongest tenant demand, followed by Wales and the South East
• Demand is driving rental inflation, with 87% of landlords reporting this in the areas they operate

Over seven in 10 landlords reported rising levels of tenant demand during the third quarter of the year – a new record high, research conducted on behalf of Paragon Bank has found.

In total, 71% of landlords reported increasing levels of tenant demand, up from the previous record high of 67% recorded in the second quarter. This marks a new all-time high across the 12-year period that research agency BVA BDRC has tracked the metric. Just 3% of landlords reported that tenant demand had fallen.

Regionally, the strongest levels of tenant demand can be seen 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%) experienced the lowest proportion of landlords with tenant demand increases.  

Linked to increased tenant demand, landlords are also reporting rising rents, with 87% identifying this as a current trend in areas where they let properties, unchanged from last quarter. Seven in 10 landlords (70%) 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 last quarter. Those planning to increase rents anticipate doing so by an average of 8.4%.

Asked about the reasons why they are planning to increase rent, two-thirds (66%) of landlords cited covering the increased cost of running a property, still the most common reason despite falling from 74% in Q2. This was closely 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 (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 last quarter.  

Richard Rowntree, Managing Director for Mortgages for Paragon Bank said: “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.”

For further information contact:

Jordan Lott
Media Relations Manager
Paragon Bank
[email protected]

Notes to editors:

BVA BDRC surveyed 785 landlords during September and October 2023 on behalf of Paragon Bank.
 

Paragon lends to private individuals and limited companies and has mortgages suitable for single, self-contained properties, as well as HMOs and multi-unit blocks. Paragon can accommodate higher aggregate lending limits and more complex letting arrangements including local authority leases and corporate leases along with standard ASTs.

Paragon introduced its first product aimed at the professional property investor in 1995 and is a member of UK Finance, the Intermediary Mortgage Lenders Association (IMLA), National Landlords Association (NLA) and the Association of Residential Letting Agents (ARLA). 

Paragon Bank PLC a subsidiary of the Paragon Banking Group PLC which is a FTSE 250 company based in Solihull in the West Midlands. Established in 1985, Paragon Banking Group PLC has over £13 billion of assets under management and manages over 450,000 customer accounts.

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. Paragon Bank PLC is registered on the Financial Services Register under the firm reference number 604551. Registered office 51 Homer Road, Solihull, West Midlands B91 3QJ.