A recent study conducted by Paragon Bank has revealed that both outer London and the East Midlands are experiencing a surge in tenant demand. In outer London, 91% of landlords reported an increase in tenant demand, with 67% describing the growth as significant.

Similarly, in the East Midlands, 86% of landlords noted a rise in tenant demand. Wales closely follows with 82% of landlords reporting an increase. On the other hand, the North East of England experienced the weakest tenant demand, with only 69% of landlords observing an increase and a mere 6% noticing a decrease in demand.

According to Louisa Sedgwick, commercial director of mortgages at Paragon Bank, “Tenant demand shows no signs of slowing down in many parts of the country.” This imbalance between supply and demand has resulted in rental inflation. Until the two are in better alignment, rental inflation is likely to persist.

Key Points

1. High Tenant Demand in Outer London & East Midlands: Recent research shows that the hottest spots for tenant demand are currently outer London and the East Midlands. Specifically:
   • In outer London, a whopping 91% of landlords have seen an increase in tenant interest. Even more, 67% describe this growth as ‘significant’.
   • The East Midlands also enjoys strong demand, with 86% of landlords reporting an uptick. Wales isn’t far behind, with an 82% increase.
2. Contrasting Tenant Demand in the North East: While many regions enjoy booming demand, the North East tells a slightly different story. Here, 69% of landlords report increased demand, which may sound high, but it’s notably lower compared to other regions. Also, 6% of landlords in this region actually saw demand decrease.
3. Imbalance Between Supply and Demand: Louisa Sedgwick from Paragon Bank has shed light on an essential detail – tenant demand is outpacing the supply of available properties. This mismatch is leading to “rental inflation”, meaning that rent prices are rising. This trend is likely to continue until the supply can better meet the demand.
4. Consistent Growth in Demand: In Britain, 67% of landlords are observing growing tenant demand. This figure remains consistent with the last quarter, marking a sustained trend. On the flip side, fewer landlords are reporting a decrease in demand – this number has dropped from 4% in the previous quarter to 2%.
5. Rising Rents: The strong demand for rental properties is, unsurprisingly, driving up the rents. The data reveals:
   • 87% of landlords confirm that rent prices have gone up in their locality.
   • Looking ahead, 51% of landlords are considering increasing their rents within the next six months.
6. Where are Rents Likely to Increase?: If you’re an investor or tenant, keep an eye on Wales, the North East, Yorkshire and Humber, and the East Midlands. These areas have the highest percentages of landlords (ranging from 91% to 94%) who are likely to increase rents.
7. Why are Rents Rising?: Inflation plays a significant role in this upward trend. 74% of landlords state that their operational costs have increased, which in turn affects the rents they charge. Additionally, 59% of landlords are adjusting their rents to align with current market rates.