The UK’s rental market is experiencing a remarkable shift, with tenant demand reaching levels never seen before. According to Richard Rowntree of Paragon Bank, landlords have reported record-high demand this year. This unprecedented increase is reshaping the landscape for both landlords and tenants.
A New Record in Tenant Demand
Paragon Bank’s recent research reveals an astonishing trend: over 70% of landlords have observed a surge in tenant demand during the third quarter of the year, surpassing the previous record of 67% in the second quarter. This marks a significant milestone in the 12-year history of BVA BDRC’s tracking of this metric.
Regional Perspectives
The rise in tenant demand is not uniform across the UK. The West Midlands leads with 76% of landlords reporting increased demand. This is followed by Wales (75%), the South East (74%), and the East Midlands (73%). In contrast, the North East (65%) and East of England (61%) saw the lowest increase in demand from tenants.
Escalating Rents: A Direct Consequence
The surge in tenant demand has a direct impact on rental prices. An overwhelming 87% of landlords note rising rents in areas where they let properties. Remarkably, 70% of landlords have increased rents across their portfolios in the last year, a jump from 65% in the previous quarter.
Future Rent Hike Plans
Looking ahead, 54% of landlords plan to raise rents in the next six months, averaging an anticipated increase of 8.4%. This decision is primarily driven by the need to cover the rising costs of property maintenance, aligning with local market rents, and offsetting increased mortgage finance costs.
Underlying Causes and Implications
Landlords cite various reasons for this trend. The most common, reported by 66% of landlords, is covering increased property running costs, followed by alignment with local market rents (63%). Interestingly, the proportion of landlords raising rents to cover increased mortgage finance costs has decreased by nine percentage points since the last quarter.
Richard Rowntree, Managing Director for Mortgages at Paragon Bank, emphasizes the significance of these trends. He points out that the continued rise in tenant demand highlights the growing imbalance between supply and demand in the rental market. This situation not only limits choices for renters but also fuels rental inflation, which disproportionately affects the most vulnerable.
The Bigger Picture
The surge in tenant demand and rent increases is a reflection of broader socio-economic factors. With social housing struggling to meet this demand and the aspirations for home ownership dampened by cost-of-living pressures, there’s an urgent need for further investment in the Private Rented Sector (PRS). The current situation suggests that without substantial intervention, the imbalance in the rental market is likely to persist, impacting renters and landlords alike.