The research found that 63% of landlords described tenant demand in the areas where they let property as either ‘very strong’ or ‘quite strong’ in Q2 2026, up from 58% in Q1.
Pegasus Insight said this was the first quarterly increase since Q1 2024, following two years of declining demand.
Almost three in 10 – 29% – landlords said tenant demand was ‘very strong’, up seven percentage points from the previous quarter, while 34% reported ‘quite strong’ demand.
Meanwhile, the proportion of landlords describing demand as ‘average’ fell from 29% to 23%, and just 5% said demand was ‘weak’.
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Supply concerns remain despite demand recovery
The report showed that the proportion of landlords reporting strong demand had fallen from 83% in Q1 2024 to 77% by Q4 2024. Demand continued to decline through 2025, reaching 61% in Q4 before falling to 58% in Q1 2026 and then recovering to 63% in the latest quarter.
Pegasus Insight said the increase in tenant demand comes as the supply of homes in the private rented sector remains under pressure.
Its research has consistently found that landlords are more likely to sell rental properties than purchase them, raising concerns about the availability of rental homes if tenant demand continues to strengthen.
Mark Long, founder and director of Pegasus Insight, said tenant demand had been “gradually normalising” from the exceptional levels recorded in 2024, but the five-percentage-point increase in Q2 suggested the need for rental accommodation remained considerable.
He added: “The concern is that demand is beginning to strengthen again at a time when landlord appetite for investment remains weak, with far more landlords still looking to sell property than buy.
“Any further measures that discourage investment or prompt more landlords to reduce their portfolios risk widening that imbalance. If demand continues to recover while the stock of available rental homes contracts, the pressure will ultimately be felt by tenants through reduced choice and higher rents.
“At a time when housing supply is already constrained, policy needs to recognise the vital role played by private landlords in providing homes. The priority should be encouraging investment and retaining existing rental stock, and the new government should be wary of introducing further barriers that risk reducing supply.”
