Landlords will be pleased to hear that tenant demand has risen for the first time in two years, reversing a quarterly decline that began after the first quarter of 2024.
Pegasus Insight's Landlord Trends research found that 63% of landlords say tenant demand in their area is either 'quite strong' or ‘very strong'.
In the first quarter of this year, that was 58% and now landlords who answered the survey saying that demand was 'very strong' increased by seven percentage points to 29%, while 34% chose 'quite strong'.
Just 5% described tenant demand as weak and the proportion calling it 'average' fell from 29% to 23%.
Pressure on PRS supply
The firm's founder and director, Mark Long, 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."
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."
Demand decline reverses
In Q1 2024, Pegasus says that 83% of landlords reported strong tenant demand.
However, that proportion slipped to 82% in Q2, and then 79% in Q3 and 77% during the final quarter.
A year later, in Q4 2025, the figure had fallen to 61%, before reaching 58% in Q1 of this year and recovering to 63% in the latest quarter.
The firm said its research has repeatedly found landlords are more likely to sell homes than add to their portfolios.
Landlord instructions fall
The Pegasus findings have been underlined by the latest RICS survey, which also reports that the supply of homes from landlords remained constrained.
It adds that tenant demand was flat in the three months to July, recording a net balance of -1% from members, down from +12% previously.
Also, new landlord instructions remained negative at -27%, while a net balance of +28% of respondents believe rents will rise over the next three months, compared with +25% before.
RICS' chief economist Simon Rubinsohn said: "Feedback from respondents to the RICS survey is continuing to draw attention to the impact of latest round of regulation on the rental market with the key indicator of new instructions pointing to a further drop in supply."
Growing tenant demand
The managing director of Accommodation for Students, Simon Thompson, said: "Most landlords around the country will have seen growing tenant demand.
"While demand from fewer overseas workers and students has softened, the falling number of landlords and homes to rent is having an impact."
He added: "Shrinking rental home supply may support higher rents, although extra regulation could offset gains.
"Also, strong tenant demand reduces void risks, though affordability checks are increasingly crucial, but increases pressure to maintain suitable homes."
