Six in 10 landlords have witnessed increased tenant demand for their properties in the final quarter of 2023, Paragon Bank has revealed.

Research carried out on behalf of the lender showed that more than a third of landlords (37%) reported demand from tenants increased significantly during the three months to the end of December, with a further 26% experiencing slight increases.

According to the findings, 16% reported no change in demand, while just 4% felt it had decreased.

Data showed that regionally, demand was strongest in the North West, with three-quarters (75%) of landlords reporting increases in demand for the period. This was closely followed by Yorkshire & the Humber (74%), with seven in 10 (71%) landlords in the East Midlands also reporting an increase in demand.

The survey also highlighted a link between tenant demand and rental inflation. Rent increases were more likely to be reported in the most in-demand regions compared to the rest of the country, wit the exception of the East of England.

In these areas, just under nine in 10 say that rents are rising currently, with 89% saying so in the East Midlands, 88% in the North West and 87% in Yorkshire & the Humber. This compares to around eight in 10 in regions such as the South West (81%) and Outer London (79%).

Looking forward, half of landlords (51%) are planning to increase rents across their own portfolio in the six months, with the increased cost of running a property the key driver for those seeking to up rents (70%).

Other forces behind planned rent increases include alignment with broader rent markets (62%) and increased mortgage costs (40%), although this has fallen by eight percentage points compared to Q3.

Managing director of mortgages at Paragon Bank, Richard Rowntree, said: "Although tenant demand has come off its record highs, there remains a chronic supply demand imbalance across large parts of the country.

"Although it’s a complex issue with many factors at play, the supply and demand dynamic dictates that we pay more for goods and services that are in high demand and short supply. It is unsurprising then to see that the landlords in the regions seeing the most demand are amongst the most likely to see rents rising. This illustrates how a healthy, sufficiently supplied PRS is needed to maintain rent levels that are affordable for the millions of people that live in rented homes."

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