Tenant demand surges as landlords continue to sell

Tenant demand has risen to its highest level in two years, as concerns over landlords selling their properties continue to grow.

Data from Pegasus Insight shows 63% of landlords now describe tenant demand in their areas as either ‘very strong’ or ‘quite strong’, up from 58% in Q1.

This marks the first quarterly increase since Q1 2024, following two years of consistent decline.

Millions of households rely on PRS

According to the findings, almost three in ten landlords (29%) now describe tenant demand as ‘very strong’, up seven percentage points from Q1, while 34% report ‘quite strong’ demand.

The proportion describing demand as ‘average’ has fallen from 29% to 23%, while just 5% say demand is weak.

However, Pegasus Insight warns that landlords remain more likely to sell than purchase properties, while rising tenant demand and concerns over supply continue to put pressure on the number of homes available to rent.

Mark Long, founder and director of Pegasus Insight, said: “Tenant demand has been gradually normalising from the exceptional levels recorded in 2024, so a five percentage point rise this quarter suggests that the need for rental accommodation remains considerable.

“It is particularly notable that the increase is being driven by landlords reporting very strong demand. Almost three in ten now fall into this category, while just 5% describe demand as weak. These figures are an important reminder that millions of households rely on the PRS for their homes and that sufficient rental supply is essential to meeting that need.”

Landlord appetite for investment remains weak

He adds government legislation must be balanced to stop landlords from leaving the market.

He said: “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.”