Findings from Paragon Bank's recent research reveal a notable uptick in tenant demand during the final quarter of 2023. Sixty percent of landlords, as per the survey, reported an increase in demand, with 37% noting a significant surge and an additional 26% citing slight increments.

Regionally, the North West emerged as a hotspot, with 75% of landlords witnessing heightened tenant demand. Following closely, Yorkshire and The Humber recorded a similar trend at 74%, and the East Midlands registered an increased demand for 71% of landlords.

The research, conducted by BVA BDRC, draws a correlation between escalated tenant demand and rental inflation. In high-demand regions, landlords are more prone to reporting rent increases, although the East of England presents an exception to this trend.

Looking forward, 51% of landlords expressed intentions to raise rents in the next six months, primarily driven by the escalating costs associated with property management, a sentiment shared by 70% of respondents. Other contributing factors include alignment with broader market rents (62%) and increased mortgage costs (40%), which have slightly diminished compared to the previous quarter.

Richard Rowntree, Managing Director of Mortgages at Paragon Bank, commented on the findings, noting, “Although tenant demand has come off its record highs, there remains a chronic supply demand imbalance across large parts of the country.

“Although it’s a complex issue with many factors at play, the supply and demand dynamic dictates that we pay more for goods and services that are in high demand and short supply.

“It is unsurprising then to see that the landlords in the regions seeing the most demand are amongst the most likely to see rents rising.

“This illustrates how a healthy, sufficiently supplied private rental sector (PRS) is needed to maintain rent levels that are affordable for the millions of people that live in rented homes.”

This analysis underscores the pragmatic challenges landlords face in navigating the intricate interplay of demand, costs, and market dynamics. As the industry looks ahead, it becomes evident that sustaining a balanced and adequately supplied private rental sector is imperative for ensuring stability in rental markets.