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Record tenant demand raises rents in first three months of 2023

Nick Cheek
Written By:
Nick Cheek

Around 67% of landlords saw heightened tenant demand during the first quarter of the year, up from the previous record of 65% in the last quarter of 2022.

According to a survey of around 700 landlords by Paragon Bank and BVA BDRC, approximately 44% of respondents saw “significant increases” in tenant demand, which is up from 39% in the previous quarter.

The report noted that this was the highest proportion since research began in 2011.

Nearly a quarter of landlords said that tenant demand had increased slightly, 15% had seen no change and only 4% reported a decrease.

Around 94% of landlords in the South West said they experienced strong or very strong demand for their properties. This was followed by Wales at 92% and South East at 91%.

Rents on the rise

Due to rising demand, rents have also been rising, with 85% of landlords noting that rents were increasing in areas where they let property.

Over half of landlords surveyed planned to increase rents across their portfolio in the next six months.

The average planned rent increase came to 8.2%.

The most popular reason for increasing rent was heightened cost of running a property at 73%, followed by market rate alignment at 60%. Nearly half cited rising mortgage finance costs.

Need to address the lack of private rented sector homes

Richard Rowntree, managing director for mortgages for Paragon Bank, said: “The fact that we’ve seen another high in the proportion of landlords who have told us that they’ve experienced an increase in tenant demand reinforces what I’ve said previously; put simply, we need more private rented sector homes, not less.

“An important element of this is policy that strikes the right balance between driving up standards and providing tenants with protection while not acting as a barrier to investment.”

He added: “Failure to address this will further drive rental inflation and increase competition for rented homes at a time when affordable housing is as important as ever.”