Almost seven out of 10 landlords reported rising tenant demand in the third quarter of the year, which is a record level, according to fresh research carried out on behalf of Paragon Bank.

The survey of over 600 landlords by BVA BDRC showed, when excluding those who were unsure, 69% of landlords reported increasing levels of demand, with over a third – 36% – stating the increase was ‘significant’.

Regionally, net increases of 79% and 74% were reported by landlords in the South West and South East (excluding London), respectively. Although still seeing relatively strong levels of interest from tenants, a lower proportion, 59%, of investors with property in the North East indicated experiencing increased demand.

This figure falls to 54% amongst those managing portfolios in central London, in part due to the region seeing the highest levels of decreasing demand (16%). Despite this, the data suggests that a significant shift is being seen in appetite for central London living as people continue to return to the capital – the same period in 2020 saw a net increase in tenant demand reported by just 16% of central London landlords, while 58% reported demand was decreasing.

Richard Rowntree, Paragon Bank managing director, said: “Landlords have been recording rising levels of tenant demand following the first lockdown, which reflects the shift in housing need created by the virus. The third quarter of the year is usually a busy one for the private rented sector with graduates starting new jobs, the beginning of the academic year and people turning to housing once the holiday season is over.

“With this seasonal demand added to already high levels of tenant demand, we are beginning to see a shortage of property in certain parts of the PRS, which is leading to rental inflation. The sector needs to expand to meet these exceptional levels of tenant needs.

“Recognising this, lenders can assist investors with products and service that supports them in responding to the needs a diverse and growing mix of tenants.”