According to Pegasus Insight’s Landlord Trends report for Q2, around a third of landlords surveyed said tenant demand was ‘very strong’ and 39% said it was ‘quite strong’.
Only 4% described tenant demand as ‘weak’ and approximately 18% said tenant demand was ‘average’.
The report explained that the “cooling” of tenant demand came after a period of “exceptionally high demand driven by low rental supply, post-pandemic migration, and sustained pressure on affordable housing”.
Pegasus Insight said tenant demand levels are still high by historical standards but warned that “softer demand could affect rental growth, yields, and investment appetite in some markets”.
Looking at different regions, the report said Yorkshire and the Humber had the strongest demand, with 81% reporting ‘strong’ demand and 36% of them reporting ‘very strong’ demand.
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At the other end of the spectrum, London and the East Midlands had lower figures at 62% and 63% respectively.
Pegasus Insight said there were several factors influencing the cooling of tenant demand, including a third of landlords choosing to live at home, especially in London and areas of the Midlands.
It noted that the “affordability squeeze” is leading more tenants to stay put, share or remain with family, especially as rents remain high.
The growth of remote and hybrid working gives tenants more freedom to live further from traditional commuter hubs.
Bethan Cooke, director of Pegasus Insight, said: “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.
“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.”
