Tenant demand in the private rental sector has eased from last year’s record highs but remains strong by historic standards, according to new research.
The latest Landlord Trends report from mortgage market specialist Pegasus Insight shows 71% of landlords rate tenant demand in their local area as “strong” with 33% describing it as “very strong” and 39% as “quite strong”.
That is down from 82% in the second quarter of 2024. Only 4% report “weak” demand, while 18% describe it as “average”.
The moderation follows a period of exceptional post-pandemic demand, driven by constrained rental supply, migration patterns and ongoing pressure on affordable housing.
TEMPERED RENTAL GROWTH
But analysts warn that while demand remains high, softer conditions could begin to temper rental growth, yields and investment appetite in some markets.
Regional variations are pronounced. Yorkshire and the Humber tops the table, with 81% of landlords reporting strong demand, 36% of them “very strong”. London and the East Midlands show lower figures, at 64% and 63% respectively.
“Factors behind the cooling trend include a shift in student behaviour.”
Factors behind the cooling trend include a shift in student behaviour, with around a third now choosing to live at home – a proportion considerably higher in London and parts of the Midlands – easing pressure on local rental markets.
Affordability constraints are also prompting more tenants to remain in existing homes, share accommodation, or stay with family. In addition, the spread of remote and hybrid working has given some renters greater flexibility to live further from traditional commuter centres.
COMPETITIVE MARKET
Bethan Cooke, director of Pegasus Insight, says: “Even after an 11% drop, over seven in 10 landlords are still seeing strong tenant demand, which shows just how competitive the rental market remains.
“However, the fact that demand has eased for the first time in a while suggests we may be at a turning point.
“For landlords, this could mean less scope for rent increases in some areas, especially where affordability is already stretched.”
FUNDAMENTALS STILL HOLD
But she adds: “That said, demand levels remain far above those of five years ago, and the fundamentals of the private rented sector are still solid.
“The question is whether this is the start of a sustained rebalancing between supply and demand, or just a short-term pause in the face of wider economic pressures. Either way, landlords and lenders will be watching closely.”
