Demand from tenants for private rented property hit an all-time high during the first quarter of 2023, said Paragon Bank.

The buy-to-let specialist found that 67% of landlords reported increased tenant demand during Q1 2023. This was a record high and up from 65% recorded during the final quarter of 2022.

Significant increases in demand were also noted by 44% of respondents. This is up from 39% on the final quarter of last year and also a record high.

A further 23% of landlords indicated that tenant demand had increased slightly, 15% had seen no change, while just 4% experienced a decrease.

The highest levels of rental demand were experienced by landlords in the East of England, with nine in 10 recording an increase, while the lowest was seen by the 73% of West Midlands-based landlords.

Rents rising

Rents have also increased, said Paragon – 85% of landlords said rents were currently rising in the areas where they let property, with over half (52%) planning to increase rents across their own portfolio in the next six months. Of those looking to increase rents, the average planned increase was 8.2%.

Covering the increased cost of running a property was the most common reason given by those planning to increase rents (73%), along with aligning with local market rates (60%). Increased mortgage finance costs was cited by 49% of those planning to raise rents.

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.

“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.”