According to new research from Paragon Bank, almost one-third of landlords (32 per cent) reported increasing levels of tenant demand during the final three months of last year. That means demand hit the highest level for almost five years – the highest since the first quarter of 2016.
Paragon says that the level of tenant demand is up from 29 per cent over the previous quarter and well above the 25 per cent recorded in the same period a year ago, but the data showed some stark regional differences in the proportion of landlords reporting higher demand.
In something of a reversal in demand patterns, central London showed just 10 per cent of landlords reporting an increase, a figure which which compares unfavourably with a whopping 58 per cent of landlords reporting growth in the South West.
Other regions that are showing good growth in demand included the West Midlands at 48 per cent, Wales at 44 per cent and the South East at 42 per cent of landlords reporting growth.
Given the hardships people are facing with the pandemic, landlords appear to be taking the view that it’s better to have a tenant in a property than achieving the highest possible rent. The healthy levels of tenant demand are not enough to persuade most landlords to risk an increase in rents at this time; most landlords plan to keep rents at the same level for at least the next six months.
Only 15 per cent of the landlords who Paragon Bank surveyed said they would increase rents, whereas around two-thirds (64 per cent) said they would keep their rents the same, and 9 per cent said they were actually planning to decrease rents.
Richard Rowntree, Paragon Bank Managing director of mortgages told MortgageStrategy.co.uk:
“We saw a clear upturn in tenant demand in the second half of 2020 after restrictions on the housing market were lifted. The strong levels of people looking for rented property continued during the final quarter, which may be related to renters wanting to secure a new property ahead of any new lockdown restrictions, which of course came from November onwards.
“The housing market is also reporting high levels of tenancy renewals, so good quality rental property is at a premium in desirable markets. I would expect that to continue into the new year and throughout 2021,” Mr Rowntree said.
“Despite the pressures on landlords due to volatile economic conditions and rising unemployment hitting tenants’ income, confidence is strong and robust. Tenant demand is playing a key role in that,” he said.
Again, despite lockdowns, landlords entered 2021 in a largely confident mood about the year ahead, and the recent success of the roll-out of the vaccination programme just compounds that.
Paragon found that landlords are feeling more confident about their business, rental yields, and capital gains in their portfolios in the UK private rented sector, than they did 12 months ago. The only indication that landlords are somewhat concerned is in their answers in the area of the economy generally, the financial markets, which could suffer economic damage because of Covid-19 and possibly Brexit.
The overall conclusion from the Paragon study was that just over one-third (35 per cent) of landlords saw the future prospects for their lettings business as good to very good when asked during the final three months of last year. This compared to just under one-third in the previous quarter and 31 per cent during the same period in 2019.
The Paragon commissioned research was carried out by BVA – BDRC and the results based on a survey of 846 landlords between December 2020 and January 2021.